Indonesia's Foreign Reserves to Strengthen in 2026

Economic Factors Supporting Growth

Indonesia's foreign reserves are projected to improve significantly by early 2026, reaching between $150 billion and $155 billion. This optimistic forecast is backed by two primary factors: a controlled current account deficit and potential foreign capital inflows. The Permata Bank Institute for Economic Research (PIER) has provided this macroeconomic analysis, highlighting the positive outlook for Indonesia's foreign exchange reserves.

Key Drivers of Reserve Growth

1. Current Account Deficit Management: The current account deficit is expected to remain under control, contributing positively to the foreign reserves.
2. Foreign Capital Inflows: As The Fed begins its interest rate cut cycle, Indonesia is likely to attract more foreign investment, further bolstering its reserves.
3. Rupiah Exchange Rate: The Indonesian Rupiah is forecasted to stabilize between Rp16,200 and Rp16,400 per USD by the end of 2026, indicating a relatively stable currency environment.

Expert Insights

Faisal Rachman, Head of Macroeconomic Research at PIER, stated that the improvement in foreign reserves is supported by these macroeconomic factors. The controlled current account deficit and the potential for increased foreign investment are seen as key drivers of this growth.

Implications for Indonesia's Economy

The anticipated increase in foreign reserves will enhance Indonesia's economic stability and provide a buffer against external shocks. It also reflects positively on the country's ability to manage its external finances effectively.