Global Uncertainty Increases, Indonesia's Economy Faces Double Threats

Rupiah (Photo: Antara)

JAKARTA - Jakarta Veterans UPN Public Policy Economist Achmad Nur Hidayat said the conflict between Israel and Iran had a significant impact on the global economy, including Indonesia.

According to him, this geopolitical storm came at a very unusual time, because Indonesia was struggling to maintain the momentum of already challenging economic growth.

Achmad said that Indonesia's projected economic growth for 2025 was at 4.7 percent, and it was even estimated that it could fall to 4.5 percent or lower, reaching 4.0 percent.

"This figure, which has actually been a challenge amid post-pandemic recovery and global inflationary pressure, is now under pressure from external turmoil caused by conflict in the Middle East," he said in a statement, Tuesday, May 17.

According to him, if the Indonesian economy is like a household, the family's income depends on the stability of work and the price of affordable basic necessities, but if energy prices such as oil spike due to conflict, people's purchasing power will be eroded, domestic inflation will increase and cost of living will be even more severe.

He added that if global uncertainty hinders foreign direct investment (FDI), then growth drivers will stall so that investors will choose to postpone expansion and will have an impact on job creation.

"The state income 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 disruption," he explained.

In addition, Achmad added that the tourism sector, which has just begun to rise after the pandemic, will be hit if international mobility declines due to global concerns of choosing to delay travel due to uncertainty and increased costs.

He added that as well as the manufacturing sector, which relies heavily on imports of raw materials, will face problems in terms of production and distribution costs.

According to him, the decline in economic projection by 4.0 percent in 2025 is not an irreversible destiny, this is a warning of the importance of smart policies and readiness to face global uncertainty.

"Israel-Iran conflict is an amplification of existing global uncertainty, a storm that tests our resilience," he explained.

He said that indeed we cannot stop the storm, but can strengthen the national economy by formulating adaptive strategies, strengthening national and international collaboration, and maintaining public trust.

"Our focus is not on technical data that is complicated, but on the core message: we must be prepared to face this storm wave with smart policies and strong collaboration, both at the national and international levels, in order to maintain our stability and economic welfare. Otherwise, not only ships are easing, but our entire future is in danger of sinking," he said.