These 3 Sectors Potentially Affected By Failing To Pay US Debt, Indonesia Needs To Be Alert

Illustration. (Photo: Doc. Antara)

YOGYAKARTA The United States (US) government has the potential to fail to pay its debt (default) on June 1, 2023. In this regard, Indonesia needs to be aware of the impact of default on US debt, although the level of dependence on Uncle Sam is low enough that the impact of the crisis is considered not too significant.

"The impact of this potential default to pay off debt is temporary, it will not have a very far impact because of course those who are attacked from the financial sector," said Center for Macroeconomics and Finance researcher Institute for Development of Economics and Finance (Indef) Abdul Manap Pulungan, quoted from Antara, Tuesday, May 9, 2023.

Abdul Manap assessed that Indonesia needed to take anticipatory steps to prevent too severe economic impacts.

Abdul Manap said that the global economy was influenced by geopolitical, US economic, and the economy of China and the European Union. The potential for default on US debt is one of the things that can affect the global economy.

However, this will not have a significant impact on the Indonesian economy. The reason is, Indonesia's level of dependence on the United States is quite low.

Abdul Manap then revealed a number of sectors that could potentially contract if the US government fails to pay its debts, including:

From the trade sector, Abdul Manap said the potential impact that emerged would come from demand for import exports by the US.

Based on trading data as of January-March 2023, Indonesia's non-oil and gas exports to the US cover 9.22 percent with an import rate of 4.79 percent. If the US fails to pay its debts, US demand for goods or services from Indonesia will decrease.

In addition to trading, the risk of default on debt by the US is also considered to have an impact on domestic investment.

Abdul Manap said the level of foreign investment (PMA) from the US in 2022 reached six percent. This figure is not too high, but the government still needs to be aware of the PMA aspect. This is because the United States invests in strategic sectors, such as energy.

The last sector to watch out for regarding the risk of default on US debt is the monetary sector.

The effect of default on US debt in the Indonesian monetary sector will be seen in the transmission of the rupiah exchange rate. The reason is, monetary turmoil generally causes capital outflows which cause depreciation of the rupiah exchange rate so that it can affect the interest rate.

In addition, the impact of default on US debt can also affect the return of Government Securities (SBN). If the US fails to pay the debt, the value of the SBN yield will increase, and the amount of costs incurred by the government for the SBN auction will increase.

That's information about the impact of defaulting on US debt. To get other interesting news, keep reading VOI.ID.