RI must brace for economic crisis

Jakarta (ANTARA News) - Indonesia must be prepared to face the consequences of a global economic meltdown that might be triggered by the financial crises in Europe and the United States, according to an economic observer.

"Although Indonesia`s economy is relatively strong compared with those of other countries, it cannot avoid the impact of a global economic meltdown," said Rohmad Hadiwijoyo, the chairman of the board of directors of the Centre for Information and Development Studies (CIDES), here on Tuesday.

"There are a number of indicators, such as investment flow and the stock market, which are already pointing to the fact that the global situation is affecting the country's economy," he stated.

"Other indicators include a decline in exports of a number of major commodities such as crude palm oil, coal, copper and rubber," Rohmad added.

However, he pointed out, the nation's imports continued to increase, affecting the country`s trade balance in April and May.

"There are many observers who predict that the trade deficit problem will not continue for long and the economy would grow at a rate of 6.4 percent in 2013," Rohmad went on.

"Such optimism is largely based on reports about rising investment and domestic consumption," he said, adding that a decline in foreign direct investment truly reflected the way Indonesia was affected by the current global uncertainties.

"Many foreign investors withdrew their investments in May 2012 to avoid high risks," Rohmad noted.

He said the outflow of portfolio investment and the weakening of the country`s trade balance continued to put pressure on the rupiah, leading to its depreciation against the US dollar.

"The rupiah has depreciated by 9.8 percent since August 2011," Rohmad pointed out. (A014/INE/BSR)