CONFLICT in the Middle East is currently heating up with the attack of hundreds of Iranian drones on Israel on Sunday (14/04) in response to the Israeli attack which destroyed the Iranian Consulate building in Damascus, Syria, on April 1 2024.
Apart from triggering regional tensions to the global level, the escalation of this conflict will also have an impact on the global economy and will increase macroeconomic risks for the Indonesian economy. Responding to this situation and in order to take anticipatory steps, Coordinating Minister for Economic Affairs Airlangga Hartarto held a limited meeting with all elements of the Deputy at the Coordinating Ministry for Economic Affairs along with a number of Ambassadors on Monday (15/4).
“The extent of the impact (conflict escalation) on the Indonesian financial market will only be visible when the market opens tomorrow morning (Tuesday, 16/04). “However, anticipatory steps will be prepared to maintain market confidence regarding the potential impact of increasing commodity prices, especially oil due to supply disruptions, as well as increases in the price of gold, as a safe haven asset, and spillovers to other sectors,” said Coordinating Minister Airlangga.
Coordinating Minister Airlangga also said that the conflict would also cause disruption to the supply chain through the Suez Canal which would have a direct impact at least in increasing cargo costs. The products affected include wheat, oil and components of production equipment from Europe. Fundamentally, the Indonesian economy is still relatively strong, economic growth is still maintained above 5% with controlled inflation.
As of February 2024, Indonesia’s trade balance is still experiencing a surplus, and is supporting Foreign Exchange Reserves, which at the last position in March 2024 were recorded as still strong.
“Certainly the Government will not remain silent, we will prepare a number of strategic policies to ensure that the national economy is not further affected. “Of course we must maintain the level of market confidence in the ability of the national economy to respond to the impact of conflict escalation,” stressed Coordinating Minister Airlangga.
Discussions on a number of policy responses at the meeting included those related to responding to the impact of conflict at regional and global levels, the performance of the banking sector and capital markets, controlling inflation, as well as plans for coordinating the fiscal and monetary policy mix with the relevant authorities for exchange rate control strategies and managing the budget deficit to front.
“We hope that market players will remain calm and not take speculative steps. The government will continue to pay close attention to existing global and regional developments and will take strong and focused steps to maintain financial system stability. “We hope that a measured policy response from the Government will be able to properly mitigate the impact of the current escalation of global conflict,” concluded Coordinating Minister Airlangga. (RO/Z-6)
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