Indonesia’s rupiah is forecast to reclaim its position as Asia’s worst-performing currency on shrinking foreign-exchange reserves and the risk of capital outflows.

After two years in which Malaysia’s ringgit weakened the most out of the region’s major currencies, the rupiah is seen dropping 6.2 percent against the dollar from Nov. 30 to the end of 2016, twice as much as the ringgit, according to a Bloomberg survey of strategists. Indonesia’s currency declined the most among Asian emerging markets in 2012 and 2013, weakening 5.9 percent and 21 percent respectively, as commodity prices fell and tighter U.S. monetary policy triggered a flight from developing nations.

“The Indonesian rupiah ranks highly on our scorecards in regards to capital-flow vulnerability,” said Jason Daw, the Singapore-based head of Asian foreign-exchange strategy at Societe Generale SA, the third-best forecaster of the currency in Bloomberg rankings in the last quarter.

Indonesia’s foreign-exchange reserves have fallen for nine months through November and overseas investors hold 38 percent of its local-currency sovereign bonds, which leaves the country susceptible to outflows as the Federal Reserve raises interest rates and China’s economy slows. While President Joko Widodo is trying to reduce Indonesia’s reliance on commodity exports, such a transition will take time and economists are forecasting only a modest improvement in growth next year.

Growth Forecasts
Societe Generale sees the rupiah falling to 15,300 a dollar by the end of 2016, compared with the 14,750 median estimate in the Bloomberg survey. Only Argentina’s peso and Brazil’s real are seen declining more over the period than the rupiah among 23 emerging-market exchange rates. The rupiah climbed 0.9 percent to 13,788 as of 10:56 a.m. in Jakarta on Monday.

Foreign-exchange reserves have fallen 10 percent this year and are at the lowest level since December 2013. That will limit Bank Indonesia’s ability to defend the currency should rising U.S. interest rates and the slowdown in China, which will further depress commodity prices and could result in a significantly weaker yuan, spur capital outflows.

Foreign ownership of rupiah sovereign bonds has risen from 30 percent five years ago and peaked at 40 percent in January. The current proportion compares with 31 percent in Malaysia and 15 percent in Thailand, central bank data show.

Indonesia’s economy will expand 4.7 percent this year and 5.1 percent in 2016, according to Bloomberg surveys. Bank Indonesia said on Thursday it sees growth next year at the lower end of a range of 5.2 percent to 5.6 percent and that the room for a rate cut was getting bigger. Such a reduction is likely to weaken the rupiah.

‘More Vulnerable’
President Widodo has stepped up efforts to spur economic growth since revamping his cabinet in August. The government has unveiled a series of policies including simplifying rules for business permits and overturning restrictions on foreign workers. It’s also planning to cut taxes and spend more on infrastructure next year.

Nomura Holdings Inc., the second-most accurate forecaster of the rupiah in Bloomberg rankings last quarter, raised its end-2016 forecast to 14,850 from 15,200 this month.

“We’re more optimistic on our outlook for Indonesia and the rupiah in 2016,” said Dushyant Padmanabhan, a Singapore-based strategist at Nomura. “Locally, we see an improvement in domestic demand and a pickup in public capex as fiscal and monetary stimulus start to bear fruit.”

The World Bank said in a statement last week that 2016 “will continue to be challenging” for Indonesia and “there could be some market turbulence” as demand from China weakens further and U.S. interest rates rise. Although public sector spending has improved, revenue collection remains a challenge and threatens to derail the government’s disbursement plans for next year, said the lender. It’s forecasting 5.3 percent growth next year.

“The rupiah is more vulnerable compared to other Asian currencies we cover given the external imbalance, weak commodity prices and a reversal of foreign ownership in local-government bonds with the Fed’s tightening,” said Roy Teo, a Singapore-based senior foreign-exchange strategist at ABN Amro Bank NV. The Dutch lender predicts the exchange rate will weaken to 15,000 a dollar by end-2016.