Jakarta, Aug 28 (Antara) - Concerns about the unfavorable economic conditions in the country and global economic uncertainty are growing following the Rupiah's depreciation to about Rp14,000 against the U.S. dollar.
The economic difficulties that have manifested themselves recently are posing a dangerous threat to the country and should be dealt with immediately.
"In terms of economic fundamentals, growth and socio-politics, the economic conditions today are different from those during the economic crisis of 2008 and 1998. But the government should not be careless because the present economic conditions can pose a dangerous threat," former President Soesilo Bambang Yudhoyono, or SBY, said at his Puri Cikeas residence in Bogor, West Java, on Thursday night.
The former President asked the government of President Joko Widodo (Jokowi) to remain alert in the face of present conditions, particularly with regards to the ongoing unfavorable economic conditions.
The same concern was also raised by Zulkifli Hasan, Chairman of the People's Consultative Assembly (MPR). He reiterated that the current economic conditions were different from those existing in 1998.
"However, the economic difficulties are now there for everyone to see. The prices of basic necessities are soaring, while companies have begun cutting the working hours of their employees," Hasan pointed out.
Moreover, the Rupiah's value against the U.S. dollar has continued to weaken and is expected to result in the bankruptcy of financial institutions.
Many banks and non-banking financial institutions might also go bankrupt if the rupiah plunges to Rp16,000 against the U.S. dollar, an economist has warned.
"If the government is unable to push up the Rupiah's exchange rate or lets the currency weaken to a level of Rp16,000 per dollar, the banking industry and non-bank financial industry will face difficult times and will be placed under the threat of bankruptcy", the President Director of the Center of Banking Crisis (CBC), Achmad Deni Daruri, said on Tuesday.
Finance Minister Bambang Brodjonegoro said he was concerned with the global economic uncertainty more than the economic slowdown.
"Is there a global economic slowdown? Yes, there is, but for me that is not what worries me. What needs our attention is global economic uncertainty that is weighing on many countries, including Indonesia," the minister said on Thursday.
He said the government and the business community should be responsive to the dynamic global economic conditions.
"Who had expected China to devalue its yuan?" he asked.
According to CBC President Director Daruri, the stress test simulation conducted by the CBC had shown astonishing results.
The simulation showed that if the rupiah weakened to Rp15,000 per dollar and the composite share price index of the Indonesia Stock Exchange dropped by up to 20 percent, one of the insurance companies would go bankrupt, he said.
Also, if the local currency continued to fall to a level of Rp16,000 per dollar, three middle-class banks would be under a threat of collapse, he said without giving details on the insurance firm and banks¿ concerns.
"But all this can be overcome if the government acts quickly. The short-term solution is to formulate a firm and clear protocol for crisis", he said.
"At this moment the Rupiah is highly prone as the competitive edge in all sectors is weak. This must be strengthened. How can we do so? I think we have to take a lot of steps", he said.
However, Finance Minister Brodjonegoro expressed that he was not too worried yet about the current depreciation of the country's Rupiah currency.
Brodjonegoro was of the view that the main cause of depreciation was not the country's economic fundamentals, but global economic pressures that had led financial market players to become irrational.
"The present condition is not rational in the sense that it does not reflect the economic fundamentals, but it has happened due to the negative market sentiment," he pointed out.
He noted that the Rupiah's depreciation also had the potential to trigger a currency war following the devaluation of the Chinese yuan and the Vietnamese dong.
"It is difficult for the rupiah to appreciate as other currencies are also depreciating," he remarked.
Therefore, the government should take anticipatory steps and formulate the best policies, former President Yudhoyono said. He believed the government must formulate good policies to anticipate the crisis and minimize its impact on the people.
"During the 2008 crisis when other countries had negative growth, Indonesia's economy was able to grow at the rate of 4.5 percent. Currently, we can minimize the impact of the unfavorable economy by preparing 'an umbrella before rains fall,'" he said.
Yudhoyono added that the two main concerns at present were the economic turmoil and pressures in play at the global and regional levels; and the turmoil and pressures being faced by the Indonesian economy.
"We should be rational and have a clear mind in facing the economic conditions now. We should not look at it in terms of black and white, but raise awareness and care for what is happening," the former president stated.
He suggested the government should pay attention to three things, namely the slowing down of economic growth in the second quarter, development of inflation and the waves of job losses.
"Economic growth must be maintained. It should not drop from 6.0 percent to 5.0 percent and then slide down to 4.0 percent because it would affect all sectors of life," he said.
Earlier, Institute for Economic Development and Finance (Indef) President Director, Sri Hartati had said that in order to tackle the economic slowdown, small-and-medium scale enterprises (SMEs) should be empowered.
"SMEs should be empowered in an effort to turn domestic potential into a pillar for the economy during the crisis as it happened during the 1998 economic crisis," she said on Sunday. (T.A014/INE) (T.SYS/A/BESSR/A. Abdussalam) 28-08-2015 18:26:48 |
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