Donald Trump Wins US Election Wins, Here's The Negative Impact On The Indonesian Economy

Donald Trump (Photo: IG: Realdonaldtrump)

JAKARTA - Researcher from the Center of Reform on Economics (CORE) Indonesia Yusuf Rendy Manilet assesses that the election of Donald Trump as President of the United States (US) for aggressive protectionism policies, such as the application of import rates, especially from China, will again have a complex impact on the Indonesian economy.

"I am worried that this policy could trigger a broader trade war, disrupt the global supply chain, and reduce world economic growth," he told VOI, Thursday, November 7.

Yusuf said that Indonesia as a country that is involved in international trade will feel the direct impact of this global economic slowdown, including increasing the volatility of the rupiah exchange rate due to market uncertainty.

Meanwhile, in terms of monetary policy, Yusuf conveyed that Trump's policy, which previously pushed low interest rates through pressure on the Federal Reserve, could create high volatility in foreign exchange markets.

According to Yusuf Bank Indonesia, it may have to intervene more aggressively to maintain rupiah stability. In addition, the potential for capital flights due to this protectionist policy can encourage BI to make higher interest rate adjustments than it should, which in the end could hinder domestic economic growth.

"The increasing risk of global inflation is also a challenge in maintaining domestic price stability," he explained.

According to Yusuf, Indonesia needs to formulate a tough strategy to strengthen economic resilience. The first step that must be taken is to reduce dependence on certain markets, especially by expanding the diversification of the export market.

Yusuf said this would help reduce the risk of changing US policies that might disrupt market access or create new trade barriers.

In addition, strengthening the import substitution industry and increasing the competitiveness of domestic products is very important to create a stronger and more independent economic foundation.

Yusuf explained that as a long-term step, strengthening regional economic cooperation through ASEAN and various other regional trade agreements must be a priority.

"This strategy can be an equalizer for the uncertainty of US policies, so that Indonesia has an alternative stable market access in the region," he said.

Yusuf said the Government needs to strengthen the domestic market so that Indonesia is not too vulnerable to external turmoil. Strong domestic market development will also support stable demand, regardless of global fluctuations.

According to Yusuf, the coordination of policies between Bank Indonesia and fiscal authorities must be strengthened to build a bigger buffer in the face of global market volatility.

"Bank Indonesia needs to ensure sufficient foreign exchange reserves in anticipation of more intense external turmoil. In this scenario, market intervention may also be more active to maintain rupiah stability," he said.