Singapore Recession Alarm Sounds, Indonesia's Trade Balance Can Be Disrupted

Illustration. (Photo: Unsplash)

JAKARTA - The country of Lion is now hit by a recession after its economy was in decline for two quarters. Singapore's economy is under pressure due to the COVID-19 pandemic which forces the country to carry out social restrictions until lockdown to prevent the spread of the virus.

Then what is the impact of the Singapore recession on Indonesia's trade balance? Executive Director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad said there were three negative impacts of the Singapore recession on the national inflammation balance.

First, there will be a decline in the trade balance between Indonesia and Singapore. Based on cumulative data from the Central Statistics Agency (BPS) from January to June 2020, Indonesia's non-oil and gas trade balance with Singapore recorded a deficit of US $ 0.4 billion (US).

"I think it is clear that with Singapore, there will definitely be a decline in trade. Why is it going down? Because Singapore's demand has fallen, the economic growth has decreased because imported goods and services are limited," he said, when contacted by VOI, Thursday, July 16.

Tauhid said that for Indonesia, the decline in trade with Singapore would certainly weaken the national trade balance. Export and import can increase in deficit or vice versa surplus, but the total volume of Indonesia's trade balance will decline.

"Second, of course, because Singapore is one of the big investors in Indonesia, in 2019 it will reach approximately 190 million US dollars. I think it will drop drastically in 2020. Because Singapore investors when their country experienced a decline in their economic growth. will try to build the country first rather than investing outside, "he explained.

Third, when a country has a decline in economy, it means that people's income also falls. Tauhid said, the impact on leisure or people's ability to use leisure time is decreasing.

"The implication for us is that Singapore is one of the largest tourists in Indonesia, especially in the Riau Islands region. Batam will definitely decline. So these three things will cause our economy to have an impact," he said.

However, Tauhid said, the economic recession experienced by Singapore did not only have a negative impact on Indonesia. According to him, there are several positive impacts. One of them is to show that Indonesia does not depend on other countries.

"The positive impact is yes, this is the embryo that we cannot depend on a large enough country," he said.

Furthermore, Tauhid said, Indonesia must change the road map for trading partners and look for other countries that have great export potential for Indonesia.

"We must think of other countries as major trading partners. For example, China, America, India and Japan must be encouraged as a source of trade partners, sources of investment and tourists," he said.

The government, said Tauhid, could boost exports to China, because China's current economic conditions have improved after previously being depressed due to COVID-19.

"We catch the phenomena of changes in investment from other countries that are about to enter that must be caught quickly. I think that is the positive side that we must catch from the slump in Singapore's economy," he explained.