Cautiously Optimistic

The challenges and opportunities for Indonesia’s economy in 2020 and beyond.

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SO FAR, there is no sign that the trade war between the United States and China, the two biggest economic powers in the world, will come to an end soon. The uncertainty surrounding the United Kingdom’s plan to leave the European Union, along with the dispute between South Korea and Japan are some of the other external negative sentiments. The ongoing spats have sent tremors through the global economy, causing the International Monetary Fund (IMF) to cut this year’s outlook for global economic growth from 3.3% in April to 3.2% in August. The issue of a global recession also arises as developed countries like the US, China and Germany release lackluster economic data.

The external headwinds will have an impact on the domestic economic and financial situation. The Jakarta Composite Index (JCI) shrank to 5,826 in May from 6,194 at the end of last year. The country’s central bank Bank Indonesia (BI) is also still maintaining its stance of being ahead of the US Federal Reserve’s curve by cutting its benchmark rate by a total of 75 basis points throughout this year. The rupiah so far is hovering at 14,200 per US dollar year to date. The country’s current account deficit (CAD) also continues to widen to $8.4 billion (3.04% of GDP) in the second quarter of this year, compared with $7 billion (2.6% of GDP) in the previous quarter.