Politics
Middle East: what impact will the Iranian attack on Israel have on the Indonesian economy?
Iran's attack on Israel on Saturday (04/13) has sparked fears of rising tensions in the Middle East region, which could send global oil prices soaring. What impact will this have on the Indonesian economy?
Fithra Faisal Hastiadi, a professor at the Faculty of Economics and Business at the University of Indonesia, said the dispute would not have a big impact as tensions would gradually decrease.
Impact [situasi] uncertainty [di tengah konflik] “What we can feel directly is global oil prices, but it won't last long,” Fithra told BBC News Indonesia.
Along the same lines, Poppy Sulistyaning Winanti, professor of international relations at Gadjah Mada University, also believes that the economic impact will only be significant if Israel decides to retaliate against Iran.
However, Fithra and Poppy did not rule out the possibility that the situation would change dramatically if Israel suddenly decided to attack Iran. If this happens, the Indonesian economy will be affected.
Why is the situation gradually improving?
From the start, observers predicted that tensions would not rise too sharply because Iran had informed Israel and its ally, the United States, that they would carry out an attack.
As a result, Israel was better prepared to face attacks. The United States, United Kingdom, France and Jordan immediately helped repel more than 300 drones and missiles fired by Iran at Israel.
Some observers believe that Iran calculated that this attack would not have too great an impact.
According to them, Iran only wanted to save face after the Israeli attack on its consulate in Syria on April 1.
The aim is to demonstrate their capabilities, but not to cause an increase in tensions, an observer who has advised several British prime ministers, Tom Fletcher, told the BBC.
Lecturer at the Faculty of Economics and Commerce, University of Indonesia, Fithra Faisal Hastiadi, considers that currently the parties in the conflict vortex understand that they are trapped in a situation Mexican spread.
This term is generally used to refer to a situation in which the parties involved in a conflict know that their positions are equally strong and mutually threatened.
Under such conditions, no strategy can make one party or the other win. If just one of them attacks, it could backfire and start a bigger conflict.
In fact, they already know that behind Iran are Russia and China. Iran also knows that behind Israel is the United States and NATO, Fithra said.
Poppy Sulistyaning Winanti also thinks there is little chance Israel will retaliate, especially since Iran is suspected of possessing nuclear weapons.
From the perspective of international relations, the possession of nuclear weapons is important to prevent other parties from retaliating for their actions, he said.
Iran has promised not to attack again until Israel behaves properly.
Israel itself is still considering whether to carry out a retaliatory attack, even though the United States has warned it not to attack Iran in order to avoid further conflict.
Israel's vague attitude has created uncertainty in the region, both politically and economically. According to Fithra, this uncertainty could impact the Indonesian economy, but not significantly.
“The impact of the uncertainty that we can feel directly is in global oil prices,” he said.
However, this will not last long because yes, there will be pointBut pointThis may take a month to two months at most.
However, Fithra did not rule out the possibility that the situation could suddenly deteriorate because one side pulled the trigger on launching new attacks.
What would be the economic impact if tensions suddenly escalated?
If a bad eventuality arises and war breaks out, Fithra fears that global oil prices will rise.
“If that’s the case, then if we look at the global impact, the global oil price will definitely be above $100 per barrel,” Fithra said.
Iran is in fact on the list of the world's top 10 oil producers. The country is also in the Middle East, an oil-rich region.
However, according to Fithra, oil prices will rise not because supply will be reduced due to the war, but because trade routes will be disrupted.
To the south of Iran lies the Strait of Hormuz, which constitutes the most important oil trade route in the world. About a fifth of the world's oil production passes through the Strait of Hormuz each day.
In reference to data According to the U.S. Energy Information Administration, in 2018 alone, oil distribution through the Strait of Hormuz reached 21 million barrels per day. This figure is equivalent to approximately 21% of global oil consumption.
How will this impact Indonesia?
Fithra explained that if this scenario happened, Indonesia, as an oil-importing country, would be affected. The price of fuel oil (BBM) will skyrocket, which will then be followed by an increase in the prices of other raw materials.
The direct impact for Indonesia is that if the government wants to keep fuel prices at the current level, the burden of fuel subsidies will certainly be very heavy, Fithra said.
Based on Fithra's calculations, the government is expected to increase the fuel subsidy budget from IDR 50 trillion to IDR 110 trillion.
With this projection, public spending will exceed tax revenues. This condition is known as budget deficit.
“If it is IDR 50 trillion – IDR 100 trillion, it means that the tax burden or budget deficit, previously in APBN 2024, was between 2.3% and 2.4%, the budget deficit could be 2.8% to 2.9%,” he explained. .
Fithra fears that this condition will scare away investors because they are not sure whether Indonesia can reduce the budget deficit in 2025.
As a result, the value of the rupee will fall further. Currently, the rupiah exchange rate against the US dollar has reached IDR 16,000.
Furthermore, Director of the Center for Economic and Legal Studies (CELIOS), Bhima Yudhistira, also highlighted the possible impact if the government were to increase the prices of unsubsidized fuels, even the basic tariffs of electricity and LPG, to offset subsidy costs.
Prices of food and other products could rise
Fuel, electricity and gas are important products in the production process carried out by producers. If raw material prices increase, production costs may also increase.
Producers can also pass this increase on to society by increasing the prices of the goods they produce.
When the general price of goods continually increases, inflation increases. Bhima predicts that Indonesia's inflation rate could reach 5%, up from 2.61% in 2023.
Inflation is rising too high. The effect is felt on people's purchasing power. “In fact, the purchasing power of people belonging to the vulnerable middle class itself is being put under pressure by various increases in food prices,” he said.
Interest rates increase, repaying credit becomes more difficult
When prices start to rise and inflation rises, Bank Indonesia may increase its benchmark interest rate. When interest rates are high, government consumption should decline.
As a result, the demand for goods decreases and money circulation decreases. According to market laws, if the demand for goods decreases, prices will tend to fall. As a result, the inflation rate could also fall.
However, Bhima said the policy could put pressure on residents trying to pay various installments.
“Those who have motor vehicle payments, mortgage payments, with variable interest or variable interest, this will be immediately reflected because the high interest will last longer,” he said.
What can the government do?
After identifying various issues that could arise if tensions in the Middle East region escalate, Fithra explained a number of solutions that could provide solutions to the government.
To reduce inflation, the government can pursue two intervention options. First, defeat inflation in other sectors to reduce the impact of inflation in the energy sector on society.
He took as an example the strategy implemented by President Joko Widodo in August 2022. At that time, many parties feared that inflation could reach 10% due to rising fuel prices.
Jokowi then asked people to plant chili peppers, a commodity that contributed to high inflation over the previous six months. If there is enough supply of chili peppers, the price will fall in the market.
We saw the impact in October, even Chile experienced deflation, although in September fuel prices were adjusted. [naik]said Fithra.
As a result, Indonesian inflation was then below 6%.
The second intervention is to reduce the impact of foreign inflation, namely the rise in global oil prices which ultimately affects the prices of other imported raw materials.
So what should you expect? The government can identify producers whose imports are significant and which have a significant economic impact. So not all producers, he said.
After that, the government can help producers who have a significant economic impact by providing them with subsidies when they want to import materials.
“This can be done with subsidies so that the price is not passed on to the consumer level and prices increase, but are absorbed by the government through subsidies,” Fithra said.
Sources 2/ https://www.bbc.com/indonesia/articles/cz9lkd7w5kyo The mention sources can contact us to remove/changing this article |
What Are The Main Benefits Of Comparing Car Insurance Quotes Online
LOS ANGELES, CA / ACCESSWIRE / June 24, 2020, / Compare-autoinsurance.Org has launched a new blog post that presents the main benefits of comparing multiple car insurance quotes. For more info and free online quotes, please visit https://compare-autoinsurance.Org/the-advantages-of-comparing-prices-with-car-insurance-quotes-online/ The modern society has numerous technological advantages. One important advantage is the speed at which information is sent and received. With the help of the internet, the shopping habits of many persons have drastically changed. The car insurance industry hasn't remained untouched by these changes. On the internet, drivers can compare insurance prices and find out which sellers have the best offers. View photos The advantages of comparing online car insurance quotes are the following: Online quotes can be obtained from anywhere and at any time. Unlike physical insurance agencies, websites don't have a specific schedule and they are available at any time. Drivers that have busy working schedules, can compare quotes from anywhere and at any time, even at midnight. Multiple choices. Almost all insurance providers, no matter if they are well-known brands or just local insurers, have an online presence. Online quotes will allow policyholders the chance to discover multiple insurance companies and check their prices. Drivers are no longer required to get quotes from just a few known insurance companies. Also, local and regional insurers can provide lower insurance rates for the same services. Accurate insurance estimates. Online quotes can only be accurate if the customers provide accurate and real info about their car models and driving history. Lying about past driving incidents can make the price estimates to be lower, but when dealing with an insurance company lying to them is useless. Usually, insurance companies will do research about a potential customer before granting him coverage. Online quotes can be sorted easily. Although drivers are recommended to not choose a policy just based on its price, drivers can easily sort quotes by insurance price. Using brokerage websites will allow drivers to get quotes from multiple insurers, thus making the comparison faster and easier. For additional info, money-saving tips, and free car insurance quotes, visit https://compare-autoinsurance.Org/ Compare-autoinsurance.Org is an online provider of life, home, health, and auto insurance quotes. This website is unique because it does not simply stick to one kind of insurance provider, but brings the clients the best deals from many different online insurance carriers. In this way, clients have access to offers from multiple carriers all in one place: this website. On this site, customers have access to quotes for insurance plans from various agencies, such as local or nationwide agencies, brand names insurance companies, etc. "Online quotes can easily help drivers obtain better car insurance deals. All they have to do is to complete an online form with accurate and real info, then compare prices", said Russell Rabichev, Marketing Director of Internet Marketing Company. CONTACT: Company Name: Internet Marketing CompanyPerson for contact Name: Gurgu CPhone Number: (818) 359-3898Email: [email protected]: https://compare-autoinsurance.Org/ SOURCE: Compare-autoinsurance.Org View source version on accesswire.Com:https://www.Accesswire.Com/595055/What-Are-The-Main-Benefits-Of-Comparing-Car-Insurance-Quotes-Online View photos
to request, modification Contact us at Here or [email protected]