In a recent discussion at the Grab Business Forum in Jakarta, senior economist Chatib Basri highlighted the interconnectedness between China's economic slowdown and its impact on Indonesia's economy. Given Indonesia's substantial export activities in commodities like nickel, stainless steel, coal, and palm oil, which primarily target the Chinese market, any deceleration in China's economy inevitably affects Indonesia. Basri noted China's economic growth, which once reached double digits, has now declined to 4.5%. The ramifications of China's economic downturn extend to Indonesia, with Basri estimating that for every 1% decrease in China's economic growth, Indonesia's economy could witness a 0.3% reduction.
Additionally, Basri cautioned about geopolitical tensions, particularly in light of the upcoming presidential election in November 2024. He warned of potential political posturing towards China, which could escalate tensions and impact Indonesia's economy. Basri also addressed the global liquidity squeeze, attributing it to persistently high benchmark interest rates, notably those set by the US Federal Reserve (The Fed). He pointed out that the current stance has shifted from "high for longer" to "higher for longer," indicating a prolonged period of elevated interest rates. This liquidity tightness poses challenges not only for Indonesia but also for other countries globally. Overall, Basri emphasized that the economic slowdown in China, coupled with global geopolitical tensions and liquidity constraints, warrants attention not only from Indonesia but also from the international community. These factors underscore the need for proactive measures and strategic economic policies to navigate the complexities of the global economic landscape effectively.
