Iran-Israel Conflict Potentially Triggers Indonesian Inflation

JAKARTA - The conflict between Iran and Israel has the potential to disrupt Indonesia's economic growth. Where, the conflict triggered an increase in energy prices and inflation. "If there is a conflict, it will result in global uncertainty which will result in rupiah weakening and disrupting the momentum of economic growth," said Rully quoting Antara. Bank Woori Saudara analyst said that Indonesia's current economic growth is still the largest supported by domestic spending, especially public consumption. However, the rising inflation rate trend will disrupt the level of public consumption, coupled with the Iran and Israel conflict which will drive a surge in energy prices and inflation. Based on data from the Central Statistics Agency (BPS), the annual inflation rate (year on year/yoy) in March 2024 was 3.05 percent or an increase in the Consumer Price Index (IHK) from 102.99 in March 2023 to 106.13 in March 2024.

The latest conflict between Iran and Israel was triggered by an attack on the Iranian Consulate in Damascus, Syria on April 1, 2024.Iran then launched a retaliatory attack by firing hundreds of ballistic missiles and unmanned aircraft (drone) at Israel on Saturday (13/4) evening local time.

Previously, Coordinating Minister for Economic Affairs Airlangga Hartarto said that the government continues to monitor the rate of interest rates, oil prices, and global logistics costs as well as the absorption of Government Securities (SBN) to anticipate the further impact of the Iran-Israeli conflict. "What we are currently protecting is logistics costs. Now, if the logistics costs, yesterday before there was an Iran-Israeli conflict alone had already increased due to the Houthis (attack) and also others," he said in Jakarta, Tuesday (16/4). Airlangga also stated that the government is also trying to maintain transportation costs because it has the potential to be affected by the increase in fuel oil (BBM) costs due to the increasingly heated geopolitical tension of the world. He hopes that economic growth, inflation and domestic interest rates can be maintained amid current global uncertainty.