Deputy for Macroeconomic and Financial Coordination at the Coordinating Ministry for Economic Affairs, Ferry Irawan, stated that investor confidence in Indonesia's economic prospects remains robust despite geopolitical tensions in the Middle East. "Various growth and investment indicators show that public and investor confidence in our economy is still quite good. As of April, our state budget (APBN), inflation, economic growth, and investment remain solid," he said during the Forum Merdeka Barat 9 virtual event titled "Assessing the Impact of the Middle East Conflict on Indonesia" in Jakarta on Monday. The state budget in April 2024 experienced a surplus of IDR 75.7 trillion, contributing 0.33% to the gross domestic product (GDP). Inflation stood at 0.25%, with the Consumer Price Index rising from 106.13 in March 2024 to 106.4 in April 2024. Additionally, investment realization in Q1 2024 reached IDR 401.5 trillion. To maintain Indonesia's economic resilience, the government has implemented several policies to avoid economic shocks. These include energy subsidies from the APBN due to rising oil prices, regular social assistance (Bansos) for low-income groups (Decile 1 to Decile 4), and food assistance.
In terms of maintaining the rupiah exchange rate, the government coordinates with Bank Indonesia to strengthen fiscal and monetary policies. One such measure is the Local Currency Settlement (LCS), which mitigates exchange rate fluctuations through agreements with trading partner countries to use local currencies in transactions. "We have LCS agreements with Thailand, Malaysia, Japan, China, Singapore, and South Korea. This helps mitigate exchange rate dynamics by using local currencies for trade transactions, enhancing our economic resilience and efficiency," Ferry explained. To bolster external sector resilience, the government has mandated that 30% of export proceeds from natural resource exports (DHE SDA) must be kept in domestic currency instruments. This requirement applies to exporters with export declarations (PPE) worth at least USD 250,000. "Should external economic shocks occur, robust domestic economic resilience is expected to safeguard our economy. This helps maintain and even increase investments. Hence, during capital outflows, we remain protected by the direct investments we receive," he concluded.
