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Indonesia's economy relatively insulated from Ukraine crisis
The war will have little direct impact on the Indonesian economy and capital markets, but investors remain wary of the many indirect effects of the crisis.
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People hold signs and participate in a protest in Grand Central Station in Manhattan, New York, United States, against war in Ukraine on Feb. 19, 2022. (AFP/Stephanie Keith)
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s the Russian military invades Ukraine, Indonesia can expect little direct impact on its economy and capital markets, but investors are advised to remain wary of many indirect effects of the crisis.
Fikri C. Permana, senior economist at PT Samuel Sekuritas Indonesia, said on Thursday that Indonesia had relatively little trade and investment activities with either Russia or Ukraine, with the two countries contributing less than 1 percent of total investments last year.
He also noted that the Indonesia Stock Exchange (IDX) composite index, the main barometer of the Indonesian stock market, was down almost 2 percent on Thursday, a trend reflected in many other indices, but capital inflow to the Indonesian market remained strong with Rp 15.42 trillion (US$1.07 billion) between Feb. 1 and Feb. 23, while the rupiah remained stable at between Rp 14,200 and Rp 14,400 per US dollar due to foreign investors’ net buys.
“We see the effect of the war on the Indonesian capital market as being rather temporary, and will more likely make investors cautious,” Fikri said in a statement on Thursday.
Read also: Indonesia condemns Russian attack, prepares to evacuate citizens
The Russian military has moved its troops, in what Ukraine has called “a full-scale invasion”, deep into the latter country. Western countries have imposed sanctions to weaken the Russian economy, hoping to stop the war.
Sucor Sekuritas equity research analyst Paulus Jimmy said on Friday that the war had made the capital markets a bit volatile with investors leaning toward a risk-off, meaning they preferred to reduce their risk exposure in protecting their portfolios.
