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Airlangga: Indonesia to take Anticipatory Measures to Mitigate Impact on Economy
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Coordinating Economic Minister Airlangga Hartarto.
T
he current conflict in the Middle East is intensifying with Iran's drone attacks on Israel on Sunday in retaliation for Israel's destruction of the Iranian consulate building in Damascus, Syria, on April 1, 2024. Besides escalating regional tensions to a global level, this conflict escalation will also affect the global economy and increase macroeconomic risks for the Indonesian economy.
In response to this situation and to take anticipatory measures, Coordinating Economic Minister Airlangga Hartarto held a meeting with deputy elements at the Office of the Coordinating Economic Minister along with several ambassadors on Monday.
"The impact transmission [conflict escalation] on the Indonesian financial market will only be seen at the opening of the market tomorrow [Tuesday] morning. However, anticipatory measures will be prepared to maintain market confidence regarding the potential impacts of increasing commodity prices, especially oil, because of disrupted supplies, as well as the rise in gold prices, as a safe haven asset, and transmission to other sectors," Airlangga said.
Airlangga also conveyed that the conflict will disrupt the supply chain through the Suez Canal, which will cause an increase in cargo costs. Products affected include wheat, oil and production component parts from Europe.
Fundamentally, the Indonesian economy is still relatively strong. Economic growth remains above 5 percent with controlled inflation. Until February 2024, Indonesia's trade balance still experienced a surplus, supporting foreign exchange reserves which remained strong as of the latest position in March 2024.
"Of course, the government will not stand idly by; we will prepare several strategic policies to ensure that the national economy is not further affected. We must maintain market confidence in the ability of the national economy to respond to the impact of escalating conflicts," Airlangga emphasized.
Discussion of several policy responses in the meeting includedresponses to the regional and global conflicts, the performance of the banking sector and capital markets, inflation control, as well as plans for coordinating fiscal and monetary policy mixes with relevant authorities for exchange rate control strategies and budget deficit management in the future.
"We hope that market participants will remain calm and refrain from speculative actions. The government will continue to monitor global and regional developments and will take strong and focused measures to maintain financial system stability. We expect measured policy responses from the government to effectively mitigate the current escalation of global conflict," Airlangga concluded.
This article was published in collaboration with Coordinating Ministry for Economic Affairs Republic of Indonesia
