Indonesia’s Decision to Join BRICS Suspected as a Key Factor Behind JCI’s Decline Over the Past Week

JAKARTA, investortrust.id – Indonesia’s decision to join the BRICS economic bloc—comprising Brazil, Russia, India, China, and South Africa—has been cited as one of the key factors behind the more than 7% decline in the Jakarta Composite Index, or JCI, over the past five trading days. By the close of trading on Tuesday, Feb 11, 2025, IHSG had fallen to 6,531.99, weighed down by concerns over Indonesia’s economic independence in the eyes of global investors.

One of BRICS' core objectives is to reduce reliance on the U.S. dollar in international trade. “When Indonesia decided to join BRICS, some global investors viewed it as a move that compromises the country’s economic independence,” said capital market analyst Hans Kwee during the Focus Group Discussion (FGD) Best Stock Awards 2025, hosted by Investortrust.id on Tuesday.

Foreign Investment Outflows and U.S. Response

Kwee noted that former U.S. President Donald Trump has been particularly wary of countries seeking alternatives to the U.S. dollar. Given that the U.S. is the world’s largest dollar exporter, any move to sideline the greenback poses a threat to American economic dominance.

“When the dollar is replaced in global transactions, it creates a problem for the U.S. That’s why Trump has threatened to impose tariffs on countries attempting to align with BRICS,” Kwee explained. “This has triggered capital outflows from Indonesia.”

Trade War Fears and Economic Uncertainty

Beyond concerns over BRICS, market participants are also anxious about Trump’s potential trade policies, which could disrupt global trade flows and slow economic growth.

A key concern is Indonesia’s status as a major commodity exporter, with China as one of its largest markets. Any escalation in U.S.-China trade tensions could significantly impact Indonesia’s export revenues.

Kwee pointed out that recent economic data from the U.S. suggests continued strength in the American economy. The U.S. unemployment rate has dropped by 5%, while inflation is projected to remain at 4.3%. “This raises doubts over whether the Federal Reserve will move quickly to cut interest rates,” he said.

Domestic Policy Concerns

From a domestic standpoint, Kwee argued that investors remain uncertain about President Prabowo Subianto’s policy direction, particularly regarding budget allocations. He noted that the market perceives planned budget cuts across ministries and government agencies as potentially slowing economic growth by reducing consumer spending support.

A significant portion of the budget reallocation—approximately 30% of the Rp 300 trillion ($19 billion) in cuts—is earmarked for the government’s Free Nutritious Meals Program (MBG). However, concerns persist that this could widen Indonesia’s fiscal deficit and increase government bond issuance, pushing bond yields higher.

“It’s a combination of global and domestic factors influencing the market downturn,” Kwee concluded.