Coordinating Minister of Economic Affairs Airlangga Hartarto highlighted several risks arising from the unstable geopolitical situation that will affect Indonesia’s economy.
“The recent uncertain geopolitical condition in the Middle East and of course, the ongoing Ukraine [war], and Israel-Hamas also adding to the instability,” he said during a press conference in Jakarta on Monday, November 6, 2023.
“The world was just beginning to breathe, and now it’s suffocating again.”
However, Airlangga explained, that the government will keep trying to mitigate the risk arising from the ongoing conflict in Israel and Palestine. The government is observing the situation closely on how long the escalation will last. “We are not sure how long so we will need to anticipate,” he said.
Airlangga estimated that this ongoing escalation will impact various commodities’ prices including oil. “And since the global economic growth is slowing down, the effect of a price surge will be felt strongly,” he added.
In addition to ongoing conflicts, Airlangga also mentioned El Nino as a challenge to global economic growth. “Certainly, climate change is an ongoing issue, and El Nino will disrupt food supplies,” he remarked.
Earlier, Finance Minister Sri Mulyani Idrawati stated that the world is facing a highly volatile phase, with China, the US, and Europe trying to control their respective economic state.
“This will impact the whole world since these three regions influence more than 40 percent of the world,” she said during a Coordinating Meeting for Inflation Control in Jakarta on Monday.
The US, for example, is causing a worldwide currency depreciation due to its high level of inflation, which in turn impacted global inflation with imported inflation. Imported inflation is a type of inflation on imported goods affected by US policies.
Meanwhile, China, the world’s second-biggest economic drive, also experienced a declining economy. This, according to Sri Mulyani, will affect commodities’ prices since it will cause a decrease in demand.
In Europe, the war between Ukraine and Russia will slow down the global economy, with the additional recent escalation between Israel and Palestine which has the potential to spread to the Middle East.
Sri Mulyani asserted that Indonesia must be vigilant of the geopolitical conditions that come in waves, causing Indonesia’s economy to slow down despite recovering nicely from the COVID-19 pandemic.