The World Economy Will Face Perfect Storm, Indonesia Must Be Able To Take A Momentum For Interest In Investment

Illustration (Photo: Doc. Antara)

JAKARTA - Executive Director of the Center for Strategic and International Studies (CSIS) Yose Rizal Damuri assesses that Indonesia must be able to take advantage of the current global economic momentum that is not doing well at this time. Moreover, the world economy is predicted to face the perfect storm due to the global recession and the food and energy crisis.

"Take advantage of the momentum. Unfortunately, so far, we like to be late in taking advantage of the momentum," said Yose in Jakarta, Wednesday, September 28.

Yose said, this momentum must be utilized by Indonesia. Especially in attracting investment into the country. For this reason, Indonesia must keep the investment climate and its business conducive amid global uncertainty.

"You have to be consistent in improving the business climate and the investment climate, so that Indonesia has more attractiveness, more competitiveness among countries that are currently having problems," he said.

Yose outlined several things that can be done so that Indonesia can survive while taking advantage of the momentum of global instability. According to him, the government needs to have an adaptive macro policy instrument.

For example, when interest rates are needed to rise, the central bank and the government must also respond quickly. Likewise, when interest rates are needed to go down to maintain growth, the Central bank and the government must also do so quickly.

"First, of course, it has a macro, monetary, and fiscal economic policy that is quite adaptable," he said.

Furthermore, said Yose, the government must also be able to maintain public trust. This is important so that domestic consumption is maintained and able to encourage economic growth. According to him, the Indonesian economy depends more on domestic consumption which reaches 55 percent of the economy.

This also makes Indonesia relatively able to survive the turmoil in the world economy. "The government must maintain the confidence of the people, which is currently quite high, so that domestic consumption can still encourage the economy," he said.

Not only that, Yose emphasized that the government must also continue structural reforms to make Indonesia's business climate and investment more attractive.

"The most important thing is to continue structural reforms, especially the improvement of our policies. What has been done is with yesterday's job omnibustration," he said.

According to Yose, global investment is falling, so it is increasingly being contested by many countries. When Indonesia is able to prove it is a decent and attractive investment destination, Indonesia will benefit from the global crisis storm.

"Global investment is falling, so there are more and more fights, but if we are more stable in terms of macroeconomics, inflation is maintained, our business world is interesting. We can also become better than that country," he said.

Mitigation Policy

Meanwhile, the Dean of the Faculty of Economics and Business, University of Indonesia, Teguh Dartanto stated that the Indonesian people are said to have experience in going through various crises. He assessed that the Indonesian people's habit of naturally building social safety nets in society.

"Our society has a long experience and has gone through various economic crises, especially 1998, the COVID-19 crisis, so this experience encourages people to have quite good mitigation with various existing turmoils," he said.

Furthermore, Teguh said that the Indonesian people also have social capital. Such as recitations, community activities, religious activities, sports activities, social gatherings so that they can help each other.

"In other words, social capital encourages the formation of social safety nets at the community level," he said.

In addition, said Teguh, the Indonesian economy is mostly dominated by an informal economy that is not recorded. So that we do not know for sure the potential and many are subsistent, so these sectors are the host of the community during crisis conditions.

In addition to the strength of the community, the government has also carried out extraordinary efforts to maintain inflation and economic growth. The current global challenge is said to be bringing in a perfect storm. The effort carried out by the government itself is appreciated by Teguh. However, there are notes to further strengthen the domestic economy.

"In the perfect storm of global conditions, apart from the government working hard to control inflation, the government must strengthen the domestic economy. Indonesia has a large enough market so that optimizing the role of the domestic economy can absorb the negative impact of global economic turmoil," explained Teguh.

The role of local governments and village governments must be optimized in encouraging the regional economy. Village funds are an effective instrument to encourage local economic activity. "Next year's village fund can be increased in amount so that the rural and regional economy continues to stretch," Teguh suggested.

Regarding the global crisis, the turmoil in energy prices, food prices as well as the decline in demand for Indonesian export goods will certainly be transmitted to the domestic economy. However, said Teguh, it will not be too deep.

"The impact is not immediately clear because Indonesia is always lag behind its low integration of the Indonesian economy in the global value chain (GVC). Indonesia's low in GVC can make Indonesia's economy relatively resilient from various shocks," concluded Teguh.

Previously, Coordinating Minister for the Economy Airlangga Hartarto said the global economy was facing challenges called the perfect storm or 5C, namely COVID-19, Russia-Ukraine conflicts, climate change, commodity prices, and cost of living.

Arilangga said that one of the key sectors in dealing with the global crisis is the food industry. This is because the availability of food that can be reached by various parties is considered capable of maintaining national economic stability.