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Bumpy road ahead for exporters if world enters recession
If a World Bank scenario of a global recession in 2023 proves right, pressure is set to mount on export-oriented Indonesian businesses.
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A worker cuts an iron bar at Belawan International Container Terminal in Medan, North Sumatra, on July 15. Belawan Port handles both exports and imports. (Antara/Fransisco Carolio)
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f a World Bank scenario of a global recession in 2023 proves right, economists and businesses expect pressure to mount on export-oriented Indonesian businesses.
They accept that, as central banks raise interest rates to tame inflation, a slowdown in demand would likely be followed by lower commodity prices.
“As central banks across the world simultaneously hike interest rates in response to inflation, the world may be edging toward a global recession in 2023 and a string of financial crises in emerging markets and developing economies that would do them lasting harm,” the World Bank warned earlier this month based on a new study.
“Global growth is slowing sharply, with further slowing likely as more countries fall into recession,” World Bank Group president David Malpass said in a statement. “My deep concern is that these trends will persist, with long-lasting consequences that are devastating for people in emerging markets and developing economies.”
On Thursday, Bank Indonesia hiked its benchmark interest rate by a larger-than-expected 50 basis points (bps), hours after the United States Federal Reserve had raised its key rates by 75 bps. The shrinking interest gap with the US has seen the rupiah depreciate more than 5 percent against the dollar so far this year.
Read also: BI lifts rates more than expected after Fed hike
This has helped domestic exporters at a time of high prices for key Indonesian commodities, notably coal and crude palm oil (CPO), which contributed around 18 percent and 12 percent to total exports, respectively. Indonesia’s trade surplus from January to August was up 68.6 percent year-on-year (yoy) at US$34.92 billion.
