Indonesia's Economic Growth Is Predicted To Be Only 4 Percent Impact Of The Iran-Israeli War

Illustration (Photo: Doc. ANTARA)

JAKARTA - Jakarta Veterans UPN economist Achmad Nur Hidayat predicts Indonesia's economic growth will only be 4 percent in 2025 due to the conflict between Iran and Israel.

"Even though previously it was projected to stay in the range of 4.5 to 4.7 percent. The increase in oil prices will reduce purchasing power, increase inflation, and increase the state budget," he said, Sunday, June 22.

He explained that the war between Iran and Israel is not just a regional war but has the potential to become a global war that threatens the stability of the global and national economy.

For example, the immediate impact was the increase in Brent crude oil prices by up to 5 percent, while WTI oil jumped more than 6 percent.

The main source of concern is in the Strait of Hormuz, a strategic shipping route that is crossed by about 20 percent of the world's oil supply.

If the conflict continues and this route is disrupted, the spike in oil prices will spread to all sectors.

According to Achmad, the economic growth rate has been a challenge amid post-pandemic recovery and global inflationary pressures, now under pressure from external turmoil caused by conflict in the Middle East.

Because, if the price of basic necessities soars due to rising oil prices, the purchasing power of the family will erode, domestic inflation will soar, and the burden of people's lives will increase significantly.

Likewise, direct foreign investment (FDI) which is the driving force for growth is threatened with delays due to increasing global uncertainty and investors who choose to delay expansion.

In addition, state revenues from commodity exports, which had been a savior in previous crises, will also be affected if global demand decreases or supply chains are disrupted due to soaring logistics costs and shipping disruptions.

On the other hand, Indonesia's tourism sector, which has begun to rise after the pandemic and is highly dependent on international mobility, will be hit hard if the global community delays travel due to uncertainty and increased costs.

The manufacturing sector which relies on imports of raw materials and exports of finished products will also be affected. The increase in raw material costs and delivery difficulties can hamper production and competitiveness," concluded Achmad.