Indef: The Possibility Of Global Economic Recovery Is Getting Thiner As Iran-Israel Conflicts

JAKARTA - Deputy Director of the Institute for Development of Economics and Finance (Indef) Eko Listiyanto said optimism for global economic recovery in the future will grow better due to the conflict between Iran and the Israeli regime.

"This can be said that the global economy is also not doing well. When this conflict erupts, it is increasingly felt that the global economic recovery or say optimism that the global economy in the future will grow better, meaning that it will be thinner," he said in a webinar 'The impact of Political Economic Policy in the middle of the Iran-Israeli War' in Jakarta, quoted from Antara, Monday, April 22.

According to him, there are a number of signs that indicate the potential for the weakening of the global economy will continue.

The first is the aspect of strengthening the United States (US) dollar which increased significantly throughout 2024 to 4.7 percent.

The second indication is that the hope of reducing the global interest rate (Fed Funds Rate) is getting worse, which has so far almost touched 6 percent.

"If we look at the latest surveys from the financial sector, it illustrates that what was previously estimated that in June (2024) there would be a decline in the Fed Funds Rate (FFR), it would be increasingly quote-unquote irrelevant," he said.

This means, continued the Deputy Director of Indef, there is an opportunity that high interest rates (FFR) will be maintained for a long time. In fact, economists or market participants estimate that there will be no interest rate decreases for longer than 75-80 basis points (bps).

"It illustrates how uncertainty is getting higher," he said.

In addition to the exchange rate, global oil supply also has the potential to experience disruption considering that 21 percent of the commodity trade flow is through the Strait of Hormuz which is prone to conflict because the area is controlled by Iran.

"If 21 percent of this global oil supply is disrupted, that must be the implication for oil prices, which actually at today's moments, the price has increased. On the other hand, I am still analyzing how far this will go, "said Eko.