headline

US-China Deal On Tariffs Predicted To Reduce Pressure On Indonesian Economy

Certainty of tariff rates at a reasonable level between trading partners such as the United States and China is projected to eliminate uncertainty factors in the market, and more importantly, reduce pressure on Indonesia's economic growth. Head of Investment Specialist PT Manulife Aset Manajemen Indonesia Freddy Tedja explained that the easing of the tariff war is expected to stabilize the rupiah exchange rate. If the stability of the rupiah has been achieved, it is hoped that Bank Indonesia will be more free to carry out monetary easing to lower interest rates, in accordance with its communication to support economic growth. In addition, he continued, the acceleration of government spending execution can also create a chain effect on economic activity. Finally, the expectation of a global economic slowdown is expected to make oil price fluctuations more controlled with a downward trend. This can have a positive impact on the State Budget (APBN) because based on the budget posture, the impact of the decline in oil prices on state revenues is still smaller than the savings created from spending on fuel subsidies. "There are at least five potential catalysts that have begun to appear and hopefully will go according to expectations, namely win-win tariff negotiations, Rupiah stability, lowering the BI Rate, accelerating government spending, and stability in world oil prices. These five things are interrelated and connected," he explained in his analysis, Monday (12/5/2025). So far, he sees that weakening consumption continues to overshadow the Indonesian economy. The Consumer Confidence Index (CCI) in March 2025 fell to 121.1 from 126.4 previously, indicating pessimism about the prospects for income and job availability in the future. Not only that, retail sales during the first quarter of 2025 only grew 1% compared to 5.6% growth in the same period in 2024. Most recently, the release of GDP growth data for the first quarter of 2025 showed that economic momentum is still weakening, where the economy only grew 4.87% annually, the lowest growth since the third quarter of 2021 when Indonesia was just recovering from the pandemic. This condition, he said, was quite disappointing, especially since many policies and stimuli had been disbursed in the first quarter to support consumption, such as an increase in the UMR, an increase in ASN wages, fiscal stimulus compensation for the increase in VAT which was still given even though the VAT increase was canceled, which unfortunately had not produced the expected results. "We must pay attention to the steps and follow-up policies initiated by the government to support consumption. He explained that the Ministry of Finance stated that the process of reallocation and allocation of the APBN had been completed and starting in the second quarter we hope that the implementation of government spending can be accelerated to support future economic activity. The hope is that the government spending component in the following quarters will no longer contract as happened in Q1/2025, which fell by 0.08%, compared to growth of 4.17% in the last quarter of 2024 and created a chain effect on overall economic growth. 

Tag: China Freddy Tedja Indonesian Economy Tariffs