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Indonesian Chamber of Commerce and Industry


Indonesian Chamber of Commerce and Industry

Indonesia's Economy Strong to Face Middle East Crisis

Chairman of the Governing Council of the Indonesian Chamber of Commerce and Industry (Kadin), Anindya Novyan Bakrie emphasised that the fundamental conditions of the Indonesian economy are strong enough to face the threat of the impact of the crisis in the Middle East. Indonesia's macroeconomic conditions have resilience in facing the threat of crisis, both caused by global geo-political and geo-economic escalation. Anindya made the assertion when meeting the Secretary General of the International Chamber of Commerce (ICC), John Denton, at the ICC Headquarters in Paris, France, Wednesday (17/4/2024).

"To the ICC Secretary General, I expressed optimism that Indonesia's economic fundamentals are strong enough to face the pressure and threat of crisis due to rising tensions in the Middle East, such as the pressure experienced by the rupiah exchange rate against the US dollar this week," Anindya said in his statement.

A number of indicators that show the strength of the macro economy, among others, Indonesia is still able to record growth above 5%. "When the global economy only grew by an average of 2%, we and a handful of countries, such as India and China, were able to grow above 5%," he said.

Another indicator is the controlled inflation rate, far below that of other developed OECD countries. Indonesia's inflation rate based on data from the Central Statistics Agency (BPS) as of last March was 3.05% on an annual basis. Regarding the decline in the rupiah exchange rate, which broke the psychological level of IDR 16,000 per US dollar, according to Anindya, this is not the first time this has happened. Previously, in April 2020, the rupiah exchange rate also had the same fate. The weakening of the exchange rate was not only experienced by the rupiah, but also other regional currencies.

"This is due to the uncertainty of geopolitical conditions due to the heating up of the Middle East. Not to mention the tapering trade war between the US and China," he explained.

Anindya emphasised that the government and Bank Indonesia already have experience in dealing with pressure situations like the current one. "The most important thing is to maintain communication with the business world, so that targeted policies can be taken," he said.

He added that the debt to Gross Domestic Product (GDP) ratio indicator is also in a safe range, which is below 40 per cent. "We compare with other countries, not a few post-Covid, the debt ratio is still high, even above 100%," he said.

Leadership Transition To John Denton, Anindya also emphasised that democratic conditions in the country also support the economic situation to remain conducive. Democracy in Indonesia is seen from the current national leadership transition process from President Joko Widodo to Prabowo Subianto, following the election in February.

"As many as 82 per cent of the population voted, and more than half of them are young or first-time voters. This is important because half of the world's population is also facing elections this year," she explained. Related to this, Anindya said that Indonesia is not only the economic leader in ASEAN, but also the only ASEAN country that is a member of the G20. Moreover, Indonesia is currently in the process of accession to the OECD.

"In a global context, Indonesia is the Middle Force of the "Global South"," he said. In response, John Denton welcomed Indonesia's position as a hope to be able to sustain world economic growth. In addition, Indonesia is also expected to be a balancing force in world geopolitics. "Moreover, Indonesia's position in the Indo Pacific as the country with the largest Muslim population," said the ICC Secretary General.

ICC is an institution that promotes the international trade and investment system. ICC has a network that reaches more than 170 countries, covering more than 45 million businesses ranging from SMEs to large multinational companies.


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Indonesian Chamber of Commerce and Industry