USD/IDR to advance nicely towards 13,800 by end-2021 – Standard Chartered

The Indonesian economy is set to recover from pandemic shock as the economy re-opens and vaccines are deployed. Economists at Standard Chartered expect BI to squeeze in a 25bps policy rate cut to accelerate recovery, before pausing for the year and remain constructive on the IDR, given a manageable C/A deficit, relatively high carry and a weak USD.

Key quotes

“We forecast 2021 GDP growth at 6.0%, following a 1.7% contraction in 2020, on normalisation of economic activity, low base and exports recovery.

“Inflation will increase gradually to 2.9% by year-end. Below-potential growth and stable food prices to keep inflation at BI’s target.”

“We expect another 25bps policy rate cut in February to 3.5% before BI pauses in H2. BI again likely to focus on quantitative easing to support fiscal stimulus.”

“We expect USD/IDR to strengthen to 13,800 by end-2021, amid manageable C/A deficit, relatively high carry and a weak USD.”