INDEF Remind Govt to keep an eye on Turkey Crisis,World Oil Price
15 August 2018 13:10 WIB
TEMPO.CO, Jakarta - Economist of the Institute for Development of Economics and Finance (Indef) Dzulfian Syafrian stated that the government must watch out for the ever increasing world oil prices caused by Turkey's Lira crisis and the Middle Eastern geopolitical situation considering that Indonesia is set to face a political year in 2019.
“If the world oil prices suddenly skyrocket, there is a big chance that President Joko ‘Jokowi’ Widodo will issue massive subsidies,” said Dzulfian on Wednesday, August 15. He warns that Indonesia’s current double deficit would become even worse.
Indonesia is currently experiencing a fiscal deficit and current account deficit. This multiple balance sheet deficits are the main structural and fundamental reason why rupiah continues to weaken.
According to the Bank Indonesia’s Jakarta Interbank Spot Dollar Rate, rupiah is currently being traded at the level of Rp14,621 per USD which is just slightly different to Tuesday’s trade at Rp14,625 per USD.
Bank Indonesia previously stated that the current account deficit has spread to 3 percent into the second trimester while Indonesia’s Finance Minister Sri Mulyani Indrawati said that the state budget (APBN) deficit up to July 2018 was Rp151.3 trillion.
The main driving force of the current account deficit, according to Dzulfian, is the capital outflow from Indonesia to the United States. “So the dollar has returned to its land,” he said. He also argues that this phenomenon is driven mainly by the increasing US interest rate which itself is a response to the recovering economy.
He argues that this phenomenon is not exclusively felt by Indonesia but also by other developing markets such as Turkey, the country that was affected the most that can be seen by its 5 percent current account deficit from its gross domestic product.
CAESAR AKBAR