Jakarta city center (Photo: Medcom.id)
Jakarta city center (Photo: Medcom.id)

Russia-Ukraine War's Economic Impact on Indonesia Relatively Small: Economist

English trade indonesian economy russia ukraine
Antara • 22 April 2022 06:00
Jakarta: The economic impact of the Russia-Ukraine war on Indonesia was relatively small, as the two countries were not major trading partners, according to Chief Economist of PT Danareksa (Persero) Rima Prama Artha.
 
"The direct impact of the war on Indonesia is actually small because they are not our main partners," Artha stated during the Sharing Season Research & Innovation Initiative of SOEs conducted online on Thursday.
 
Indonesia's share of exports and imports with Russia in 2022 had reached 0.64 percent respectively. Meanwhile, Indonesia's exports and imports with Ukraine reached 0.18 percent and 0.53 percent respectively.

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Most of the commodities exported to Russia and Ukraine are CPO. However, the export value of these commodities is small and their value is 2.42 percent and 0.92 percent of Indonesia's total CPO exports, respectively.
 
Meanwhile, commodities imported from Russia are iron or steel that only accounted for 2.64 percent of the total imports of iron and steel. Meanwhile, Indonesia's main import from Ukraine is wheat that accounted for 24.45 percent of the total wheat imports.
 
However, Artha remarked that the increase in oil prices that affected the entire world also had an impact on Indonesia, especially on the inflation that could spread to various sectors.
 
"The highest inflation occurred this month. This is because inflation itself often occurs every Ramadan. Then, the increase in the prices of several commodities and the energy crisis made the existing inflation even higher," she pointed out.
 
Furthermore, Artha noted that the impact of the Russo-Ukrainian war on the money market was not a cause for great concern, as foreign funds entered the stock market, but these funds left the debt market.
 
"Now, it is not too worrisome because foreign ownership in our money market is only 18 percent, which is small," she stated.
 
Nevertheless, the policy of the US central bank, the Federal Reserve (Fed), regarding interest rates of up to seven times will certainly have an impact on Indonesia. This, she said, made banks more interested in providing credit, which would change the yield on bonds and put a burden on the state budget.
 
Meanwhile, the projection for world economic growth was revised to slow down amid the geopolitical conflict between Russia and Ukraine and the normalization of the monetary policy. In its April 2022 World Economic Outlook report, the IMF cut its forecast for global economic growth, from 4.4 percent to 3.6 percent in 2022.
 
In addition, Danareksa estimates that the recovery will continue amid rising prices and the potential for an increase in the BI7DRR interest rate.
 
"We project a growth of around 4.7-5.1 in the first quarter, and in general, it is 4.66-5.31, then interest rates will rise by around 0.5 to 0.75 basis points because the basis for Bank Indonesia to raise interest rates is inflation. Hence, the increase is not too much," she stated.

 
(WAH)
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