Even the foreign exchange stocks will increasingly become narrower. 
Jakarta (ANTARA) - The weakening of the Indonesian rupiah's exchange rate may pull down the country's foreign exchange reserves, chief of the Indef Center of Macroeconomics and Finance, Rizal Taufikurahman, has said.

The rupiah, which has depreciated against the US dollar, may weaken the country's trade competitiveness, which may trigger a trade deficit, he expounded in Jakarta on Wednesday.

A trade deficit would strengthen the fiscal budget deficit, which would likely lower the country's foreign exchange reserves, he added.

"Even the foreign exchange stocks will increasingly become narrower," he said.

The impact of the declining foreign exchange stocks will reduce the performance of the export-oriented industry, which will eventually lead to layoffs, particularly in labor-intensive sectors, which has begun to happen, he said.

"Besides low demand for export goods, it will also make prices uncompetitive and inefficient. At the end, the performance of the industrial sector, which has employed a large number of workers, will slowly but surely reduce the number of workers," he said.

Moreover, the demand for goods in the global market will decline, along with pressure on exporters, she said.

One of the factors weakening the rupiah is the aggressive tapering of the monitoring policy, which has led the United States Federal Reserve to raise the key interest rate, leading to capital outflows.

In addition, there is a gap in the supply of and demand for the US dollar, Moreover, Indonesia's real interest rate is less attractive for investors compared to other developing nations.

The efforts that can be made to maintain the stability of the rupiah include the use of the rupiah for domestic products. he said.

If possible, the rupiah will be used to pay for export goods to the global market.

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Translator: Muhammad Heriyanto, Suharto
Editor: Rahmad Nasution
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