Indonesia must be prepared to anticipate US-Iran tensions

Jakarta (ANTARA) - Indonesia must be ready to anticipate tensions between the United States and Iran otherwise it can affect the country's economic growth, the Institute for Development of Economics and Finance (Indef) believes.

"Certainly, global uncertainty is affecting our economy. Investors who want to expand their business domestically should wait and see. Indonesia must be prepared to accept new uncertainties," a researcher of Indef Rusli Abdullah said when contacted in Jakarta Friday.

The US-Iran conflict could become an open war in the Middle East region that will eventually push up commodity prices especially that of world oil, according to him.

Soaring oil prices could be a challenge amid government efforts to reduce deficits in the trade balance and current account, he continued.

Brent Crude Oil Futures Prices recorded at US$68.44 per barrel. While the price of West Texas Intermediate crude oil was $62.89 per barrel.

Meanwhile, in the 2020 State Budget, the price of Indonesian crude oil (ICP) is assumed to be $63 per barrel.

"The current price of oil is still relatively conducive. But if it reaches $70-80 per barrel, it can burden the state budget," Rusli said.

The domino effect of rising oil prices would mean an increase in inflation in 2020 compared to the previous year, he said.

"After the oil increase, the impact will affect domestic fuel prices which will ultimately have an impact on logistics and transportation costs, and that can also have an impact on prices of basic commodities. In the end, it can drive inflation," he explained.

To maintain national economic growth, there was a need to review the mix of government policies, Rusli suggested. The government must focus on maintaining people's purchasing power.

"Then it will make investment easier, but the Indonesian market is large," he said.

The government should carry out debt restructuring because the majority of Indonesia's debt was in US dollars, the founder of LBP Institute, Lucky Bayu Purnomo said separately.

"If oil prices rise, the US dollar can strengthen. Oil transactions usually use the US dollar," Bayu remarked.

Source: Antara News

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