JAKARTA (TheInsiderStories) – Good Morning. Indonesia’s financial market may see volatility for a moment as panics over the ongoing financial crisis in Turkey spread to emerging markets assets.
The Jakarta Composite Index fell 3.29 per cent to 5,877.52, making it as the worst performer in Asia Pacific. The rupiah dropped to 14,583 per US dollar from 14,437.
The Turkish lira fell to its lowest level in history against US dollar due to weakening confidence on the economy with most critics centered on the personality of its President Recep Tayyip Erdogan. President Erdogan is seen ruling the 17th largest economy with ineptitude and bent on personal ambition.
The President is also seen intervening the Turkish Central Bank’s monetary policy to take measures against the risk of economic overheating, signs of which had been highlighted by analysts and economists for quite a while.
Furthermore, Turkey’s deteriorating relationship with the United State (US), resulting with a tariff on its steel and aluminium industry, exacerbated the financial crisis.
Indonesia is particularly vulnerable due to its worsening current account and balance of payment conditions, just like Turkey. Bank Indonesia announced on Friday (10/08) that Indonesia’s current account deficit widened to 3.0 per cent of GDP in second quarter from 2.6 per cent in the first. The balance of payment deficit rose to US$4.3 billion in Q2 from US$3.9 billion in Q1.
The situation triggers a sense of urgency for the government to curb imports, seen as the main source of the rising trade deficit. One policy that has a positive impact on curbing imports is the mandatory bio diesel use for vehicle, which the government planned to expand it to non-subsidized diesel.
The government also takes steps not to take the US head-on in the already tensed global trade dynamics in the revision of a trade ministry norm ruled by the World Trade Organization (WTO) as unfairly restricting imports.
The case was brought to the WTO by the US and New Zealand, with the former threatened retaliatory sanctions if the Indonesian government failed to remove the norm.
However, unlike Turkey, the Indonesian economy still record tame inflation and the Central Bank is still seen as independent from the government’s intervention. The economy is also supported by strong foreign direct investment, latest data of which will be released by the Investment Coordinating Board at 09.30 Indonesian time today.
Investment, however, may slow in the next 12 months due as politics takes center stage ahead of the 2019 Presidential Election. The ruling coalition, nominating the incumbent President Joko Widodo and influential cleric Ma’ruf Amin as running mate, is preparing 225 people as its official spokesperson.
While having a strong team of public relation is important to counter any unsubstantiated and unverified information that can be repackaged into facts in this day and age, many of which whirling around in the last presidential election, it remains to be seen on what kind of noise with so many people acting as the official mouthpiece can bring to the scene.
May you have a profitable day.
TIS Intelligence Team, Email: email@example.com