T

he US narrowly escaped an economic meltdown on Tuesday as the US Senate passed a belt-tightening bill for President Barack Obama’s signature, clearing the way for the nation to raise its debt ceiling.

“The world is breathing a collective sigh of relief that the US didn’t default on their payments,” Dewi Fortuna Anwar, Vice President’s Boediono’s special advisor on foreign affairs, said on Thursday.

However, the consensus reached in Washington does not mean the rest of the world is clear of the future effects of the US’ troubled condition.

Indonesia and the US, for instance, had a combined trade valued at US$23 billion in 2010.

“Indonesia is very dependant on the US since it is the world’s largest economy. If they are facing hardships at home, the rest of the world will be affected,” Dewi said.

Despite Asia’s rapidly growing economic influence, according to Dewi, nations in the region have been unable to insulate themselves from economic crises in other parts of the world.

Experts agree that the US might increase its focus on domestic issues in the face of its economic turmoil – to the potential detriment of its foreign relations and foreign aid recipients.

“The US is in a crisis of capitalism and needs to reinvest its money in its own country rather than investing in other countries,” Mahmud Syaltout, the executive director for Global Civil Society Studies (Pacivis) at the University of Indonesia, said.

The US is currently a major source of aid to Indonesia and is involved in many sectors of the local economy, including education, environment, governance, health care and disaster response.

The EU and Japan have also traditionally been large suppliers in those areas, although recent economic and energy related events might also threaten Indonesia’s bilateral relationships.

“Emerging economies are not yet ready to pick up the slack from these previous donor countries. China is the world’s second largest economy, but is still very much a developing country,” Dewi said on the future limits of Western aid to the region.

Indonesia’s diverse foreign policy and trade agreements, however, might prove to be a blessing if the troubled economy of the US fails to recover in the near future.

“As the largest country in Southeast Asia, we have a large and dynamic market and free trade agreements with China, Japan and Korea, in addition to ongoing talks with the European Union,” Mahmud said, adding that the efforts might limit the effects of an ongoing US crisis.

Dewi echoed Mahmud’s comments, saying that it was no longer accurate to speak of a single economic superpower, adding that there were many other significant players in the international arena.

The US deal outlined the amount of cuts required and offered a time line more making the cuts, although many of the details regarding which sectors will be affected were tabled for later discussions.