Russo-Ukrainian War Economic Impact on Indonesia is Small: Economist

TheIndonesia.co - PT Danareksa (Persero) Chief Economist Rima Prama Artha said the economic impact of the Russia-Ukraine war on Indonesia was relatively small because the two countries were not major trading partners.

"Directly, the impact on Indonesia is actually small because they are not our main partner," she said in the Sharing Season Research & Innovation Initiative BUMN which was carried out online and monitored in Jakarta, Thursday, April 21, 2022.

Indonesia's exports and imports in 2022 with Russia is 0.64 percent each. Meanwhile, Ukraine was 0.18 percent and 0.53 percent respectively. Most of the commodities exported to Russia and Ukraine are CPO, but the export value is small and amounted to 2.42 percent and 0.92 percent, respectively, of Indonesia's total CPO exports.

In addition, commodities imported from Russia are iron/steel which only accounts for 2.64 percent of the total imports of iron and steel. For imports from Ukraine is wheat which covers 24.45 percent of the total imports of wheat.

However, Rima said that the increase in oil prices that affected the whole world would also have an impact on Indonesia in the form of inflation, the threat of which could spread to various sectors. "Inflation is the most intense this month because every year the month of Ramadan is the highest inflation and then there is an increase in the price of some commodities and an energy crisis that can make inflation higher," she said.

Rima conveyed that the Russia-Ukraine war impact to the money market is also not too worrying because foreign funds enter the stock market, but exit the debt market. "Now it's not too worrying because foreign ownership in our money market is small, only 18 percent," she said.

However, the US central bank, the Federal Reserve (Fed), policy regarding interest rates of up to 7 times will certainly have an impact. According to her, this has made banks more interested in providing credit, which will change the yield on bonds and put a burden on the state budget.

The projection for world economic growth is revised to slow down amid the geopolitical conflict between Russia and Ukraine and the normalization of monetary policy. In its April 2022 World Economic Outlook report, the IMF cut its forecast for global economic growth from 4.4 percent to 3.6 percent in 2022.

Danareksa estimates that the recovery will continue amidst rising prices and a potential increase in BI7DRR. "Our projections for growth are around 4.7-5.1 in the first quarter and in general it is 4.66-5.31 then interest rates will rise by around 0.5 to 0.75 basis points because the basis of BI raising interest rates is inflation, so that the increase is not too much," she said.