REPUBLIKA.CO.ID, By: Gus Fendi/Economic Researcher at Galesong Institute, Jakarta

As a developing country, Indonesiahas experienced a very dynamic situation and declining economic growth in the last 13 months. Various sources say that some economic indicators, such as the exchange rate, the amount of exports, foreign exchange reserves, and inflation signalling   a bad time in our economy and Indonesian government has failed to recover the economy.

In fact, this poor economic indicators are highly influenced by external pressures, such as global economic situation thathas not yet signalled recovery. This creates speculation in the market that just worsen the already slowing down economy. Such global economic downturn then brought negative sentiments to the emerging markets in developing countries.

Deputy Governor of Bank Indonesia, Perry Warjiyo (12/12) affirmed that the exchange rate is under pressure due to various external factors, such as the economic slowdown in China, China's Yuan devaluation, the European Central Bank's policy that does not match with market expectations and most importantly the rising of interest rate.

Generally speaking, China's economic slowdown has decreased the value of Indonesian export because China’s demand for Indonesian commodities declines. The condition got worse when China then devaluate its currency making goods from outside China more expensive, so that Indonesian export China suffers even more. As a result, Indonesian export revenue declines.

Moreover, as quoted from several online news sites, the issue of the raise of US interest rate that has been rolling since last year led to the withdrawal of nearly US $ 1 trillion from emerging markets in the period of July 2014 to August 2015. As a result, until now the developing countries, including Indonesia, are suffering due to strengthening US dollar, falling commodity prices, and economic slowdown in China. These indicate that the policies of great economy countries will highly impact the economy of developing countries.

Supporting the conclusion above, BCA economist David Sumual (17/12) said that Indonesia was affected by the Fed’s higher interest rates. Especially, Indonesia's economy is relatively small so that what happened to the US economy, China, Europe and Japan, are so impactful on Indonesia.

Therefore, basically the deteriorating economy of Indonesia is still influenced and caused by the condition and situation of the global economy, especially China and the US. Because both countries are the largest economy country in the world.

Nevertheless, there are still many positive factors that can rebound Indonesian economy as well as Rupiah. Indonesian macroeconomic indicators showed some delightful data. Inflation was declining during January to November 2015 from 6.96 percent to 4.89 percent. There was an improvement in the current account deficit of about 2 percent of GDP (Gross Domestic Product). Lastly, the increase in government expenditure, capital expenditure and early project bidding process hopefully will boost the economy.

The team leader of the International Monetary Fund (IMF) to Indonesia Luis E. Breuer (22/12) said that Indonesia has made a prudent monetary and fiscal management that were supported by fuel subsidieshistoric reform in 2015. These indeedhave contributed to the stability  of macroeconomic indicators and supportedthe economic growth.

Meanwhile, the outlook for Indonesian economy is predicted to remain solid because it  is supported by prudently crucial policies taken by the government of Indonesia to strengthen the foundation of the economy in recent years.

In the future, should Indonesia face the hardship of the economy due to external factors such as the fall in commodity prices, the dynamics of global financial conditions and the slowing economic growth of Indonesia's trading partners, like what has been happening in 2015, Indonesia shall survive. However, although the macro-economic performance in 2015 was  quite satisfactory with stable economic growth and is projected to reach 4.7 percent growth, we must see it as a starting point to accelerate our economic growth so that we can achieve 5 percent growth in 2016.

Ikuti Whatsapp Channel Republika