Indonesia's Running Transaction Deficit Can Be Implemented By The Iran-Israel Conflict

Screenshot at the event 'Ngobrol Seru Impact of the Iran-Israeli Conflict on the Indonesian Economy' held by Eisenhower Fellowships Indonesia Alumni Chapter, Monday, April 15.

JAKARTA - Economist and former Minister of Finance (Menkeu) in the 2014-2016 period, Bambang Brodjonegoro said that the impact of the Iran-Israeli conflict could exacerbate Indonesia's current account deficit. Due to external conditions, Indonesia's economy has entered the yellow light.

Our trade balance has always been in a surplus for more than two years, but I see the numbers are getting smaller and smaller. This has actually started to turn yellow light," said Bambang at the 'The Fun Talk of the Impact of the Iran-Israeli Conflict on the Indonesian Economy' held by Eisenhower Fellowships Indonesia Alumni Chapter, Monday, April 15.

Bambang said that in the last two years the trade balance surplus had decreased, as seen, the figure was already below 1 million US dollars.

According to Bambang, this condition can be critical because the trade balance of goods will find it difficult to improve because of the conflict in the Middle East which is heating up, causing global commodity prices to rise sharply, and the distribution of commodity supply chains will also be disrupted.

"Especially those through the Red Sea and the Strait of Hormuz," he said.

In addition, Bambang said that Indonesia's running balance will also experience problems because the high interest rate makes global demand weaken. "So, our exports are either manufacturing or commodity, both have no good prospects even though there is a weakening of the rupiah," he said.

According to Bambang, the weakening of the rupiah can usually be useful for reaching exports. However, the problem will arise when Indonesia's exports are still dominated by commodity products. In fact, the era of the commodity boom has ended since last year.

"So that the weakening of the rupiah against the United States (US) dollar does not help much in the context of competitiveness, especially manufacturing products," he said.

Bambang conveyed that tougher challenges arise in the service sector, because one of the deficits that arise is freight or shipping.

"With the weakening of the rupiah against the US dollar, plus the possibility of disrupting the distribution route of the Suez Canal, the Red Sea, the Strait of Hormuz, including the Indian Ocean, I am worried that our current account deficit could widen," he said.