Indonesia: Measuring the probable impact of the coronavirus – UOB
|Economist at UOB Group Enrico Tanuwidjaja assessed the potential effects on the Indonesian economy from the Chinese COVID-19.
Key Quotes
“The recent outbreak of corona virus (COVID-19) may bring about adverse economic implications, if prolonged. Despite Indonesia having a relatively low share of tourism over its GDP and is also less connected in terms of global value chain production activities, such a global epidemic could still put Indonesia in an unsettling position as the recovery of its exports market could be deferred and some of the important imports could be affected. After all, China is Indonesia’s largest trading partner for the past 7 years and Indonesia has been running a trade deficit with China since 2008, which has been getting wider.”
“Indonesia could minimize the negative exposure by increasing the exports size to other countries; especially to those with no or limited exposure against COVID-19 outbreak.”
“On the other hand, and contrary to some concerns, more than half of Indonesia’s imports from China are mainly capital goods, machineries (HS-84), and even handphones (included in HS-85) –not key food items… While slower imports of capital and machineries tend to bode well for current account deficit, we can’t ignore the fact that food and raw food imports substitute from other countries could mean higher import costs and these could carry over into inflationary pressures in the economy.”
“Through the impact of slower exports growth in some of the Indonesia’s key commodity exports and a high likelihood that it will take some time for Indonesia to diversify away its key commodity exports’ destination, our base case is for the ongoing outbreak (we conjecture for the outbreak to be contained within 6 months or earlier) to shave off 0.1-0.2ppt from GDP growth in 2020.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.