The Government Will Take Anticipatory Steps To Reduce The Impact Of The Iran-Israel Conflict

Pic : Coordinating Ministry for Economic Affairs

JAKARTA - Conflicts in the Middle East are currently heating up with hundreds of Iranian drones attacking Israel on Sunday, April 14, 2024, in retaliation for an Israeli attack that destroyed the Iranian Consulate building in Damascus, Syria, on April 1, 2024.

In addition to triggering regional tensions to the global level, the escalation of this conflict will also have an impact on the global economy and will increase the risk of macroeconomics for the Indonesian economy.

Responding to the situation and 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 and a number of Ambassadors on Monday, April 15.

The impact (of conflict escalation) on Indonesia's financial market will only be seen at the opening of the market tomorrow morning Tuesday, April 16. However, anticipatory measures will be prepared to maintain market confidence in the impact of the increasing potential for commodity prices, especially oil due to disruption of supply, as well as rising gold prices, as safe haven assets, and rambatan to other sectors," said Airlangga in his official statement, Monday, April 15.

Airlangga also said that the conflict would also cause disruption to the supply chain through the Suez Canal which would have a direct impact on at least an increase in cargo costs. Interrupted products include wheat, oil, and components of production equipment from Europe.

Fundamentally, Indonesia's economy is relatively strong, economic growth is still maintained above 5 percent with controlled inflation. As of February 2024, Indonesia's trade balance is still experiencing a surplus, and supporting Foreign Exchange Reserves, which in the last position in March 2024, is 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, the level of market confidence in the ability of the national economy to respond to the impact of conflict escalation must be maintained," said Airlangga.

The discussion of a number of policy responses at the meeting was related to the response to the impact of conflicts at the regional and global levels, the performance of the banking sector and capital markets, inflation control, and the coordination plan of the fiscal and monetary policy mix with relevant authorities for exchange rate control strategies and future budget deficit management.

We expect market participants to remain calm and not take speculative steps. The government will continue to monitor existing global and regional developments and will take strong steps and focus on maintaining financial system stability.

"We hope that the measured policy response from the Government will be able to mitigate well the impact of the current global conflict escalation," concluded Airlangga.