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US recession fears ‘mostly positive’ for Indonesia despite trade risks
The government and experts say a slowdown in the world’s largest economy may bring advantages for emerging markets like Indonesia's by expediting the anticipated reduction in interest rates.
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People shop during Black Friday in the city of Arcadia, California, the United States, on Nov. 25, 2022. (AFP/Frederic J. Brown)
A
n economic slowdown in the United States may benefit Indonesia by expediting a reduction in interest rates, the government says, as the resulting investment inflows and lower funding costs could offset declining exports.
Fears of a US recession spooked financial markets in recent days, and while such an event is far from a forgone conclusion, officials in Jakarta have signaled they are closely monitoring developments.
President Joko “Jokowi” Widodo said on Monday that “the most important thing is to be aware of global economic slowdown risks, whether they are related to interest rate policies or heated geopolitics, which is likely to [lead to a] food crisis and rising oil prices”.
Concern over the US economy grew after unexpectedly negative employment data was published on Friday, a day after a separate report showed continued manufacturing weakness in the world’s largest economy.
Some analysts pointed to the Sahm rule, AFP reported on Tuesday, which indicates that an economy is in the early stages of a recession if the three-month moving average of unemployment is 0.5 percentage points above the low recorded over the previous 12 months.
Some stock markets responded with massive sell-offs on Monday, with Japan’s Nikkei index tanking 12 percent and Taiwan seeing a record decline of 8.4 percent, while the Indonesia Stock Exchange (IDX) Composite index plunged 3.4 percent. Markets have rebounded since.
Read also: Asian stocks rebound from rout as Fed faces calls to cut rates early
