Resilient Foreign Capital Inflows Reinforce Indonesia’s Economic Strength Amidst Global Financial Uncertainty

Yuan and US Dollar

Despite the prevailing uncertainty in the global financial market and the Federal Reserve’s decision to raise interest rates, foreign capital inflows into Indonesia continue to display resilience and strength. This was confirmed by Sri Mulyani Indrawati, the Minister of Finance.

According to data provided by the Ministry of Finance, foreign investment in Indonesia’s bond market has already reached an impressive IDR 80.79 trillion year-to-date as of June 21, 2023.

In the month of May alone, foreign capital inflows amounted to IDR 6.67 trillion, while in June 2023, the figures surged to IDR 13.62 trillion month-to-date. The stock market also witnessed significant foreign capital inflows, reaching IDR 16.87 trillion. However, there has been a recent outflow or capital withdrawal of IDR 3.71 trillion.

Sri Mulyani highlighted that investors perceive Indonesia as a stable and positively growing economy, which ultimately attracts foreign capital inflows. The country’s prudent fiscal and monetary policies have enhanced this perception, contributing to the continued influx of foreign investments.

Sri Mulyani expressed her confidence in Indonesia’s economic prospects during a press conference on June 26, 2023, stating, “This reflects confidence and the perception that Indonesia’s economy is supported by prudent fiscal and monetary policies, which in combination are seen positively by investors.”

Furthermore, despite the upward trend in benchmark interest rates in the United States, the Indonesian rupiah remains resilient and even shows signs of appreciation. This stability further reinforces investors’ confidence in the Indonesian market.

In addition to Indonesia, Sri Mulyani highlighted that developing countries as a whole are experiencing significant inflows of foreign capital. She projected that the total inflows into developing countries could reach an estimated $10.4 billion in May 2023.

To provide further insights, Sri Mulyani detailed that foreign capital inflows into the stock market amounted to $6.9 billion, while the bond market attracted inflows of $3.5 billion.

These ongoing foreign capital inflows not only demonstrate the attractiveness of Indonesia’s economy but also reflect the positive sentiment surrounding developing nations as investment destinations. The prudent and well-balanced fiscal and monetary policies implemented by Indonesia have positioned the country favorably, generating confidence among investors and reinforcing its status as an appealing destination for foreign capital.