Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy

14

Photo by The Insider Stories

JAKARTA (TheInsiderStories) – Bank Indonesia (BI) and the government stated that the Britain’s Exit (Brexit) vote which decides that UK leaves the European Union will have limited impact on the Indonesian economy and only give a short term shock to the financial market. Both BI and the government argue that in term of trade relation, the amount of export and import between Indonesia and United Kingdom (UK) is small.

The global markets have different reactions to the Brexit vote. Some global investors move their investments from European market to the countries that have relatively healthy economies such as United State and Japan.

In mid day trading, the Japanese Yen soared 7.2 percent to as high as ¥99.00 against the U.S. dollar compared to yesterday, its strongest level since November 2013. While, the British’s pound  fallen to the lowest level since September 1985 at the level to $1.3230.



In domestic market, the Jakarta Composite Index (JCI) and the Rupiah stumbled at the end of mid day trading. JCI plunged 2.3 percent at the mid day trading before closing at 4,834.57 or dropped 0.8% compared to yesterday level. The rupiah slumped by 1.08 percent to Rp13,391 to the US dollar from previous day at Rp13,248. 
Coordinating Minister for Economic Affairs Darmin Nasution said Indonesia has a good relationship with UK and EU countries. The vote result is surprising for everyone and shocked both stock market and foreign exchange market.

“However, we believe our capital market will quickly recover,” he said, adding that the impact on money market should also be limited. He said, citing World Bank report, Indonesia’s economy is relatively resilience toward external upheavals.

He added Indonesia need to be on alert in the next few days and monitor the market closely. The government and Bank Indonesia will work closely to deal with this condition.



Bank Indonesia Governor Agus Martowardojo said in the current condition global investors decided to “fly to quality”. He said Indonesia can weather the global turmoil following the Brexit vote as “Indonesia’s economy remains in good shape.”

He said there will be lengthy process before UK leaves EU as there is EU treaty. UK will have to make a demand to leave EU and there will be negotiations on tariff, migration, non-tariff barriers and so on. “It could take 2 years and its implication could last long,” he said.

Agus Martowardojo also said Indonesia’s economic indicators remain under control. Inflation in June is expected to be around 0.56 percent, pressured by a rise of food products. Current account remains in good condition. “In general, our economic condition is in good shape and we can encounter this condition. We will make sure that this (Brexit vote) will not bring about negative impact on Indonesia’s economy,” he said.

Finance Minister Bambang Brodjonegoro also believes that the pressure on stock market and financial market is temporary. He said UK is one of an important member of EU. Its GDP is second largest after Germany. EU’s bargain power and strength as an economic union could decline without UK in it.

When asked about the impact on Indonesia’s economy, he said the vote results have no direct impact on Indonesia. This may cause market jittery, but that should be temporary. (*)

 

The post Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy appeared first on The Insider Stories.

Source: The Insiderstories
Bank Indonesia, Govt see limited impact of Brexit vote on Indonesia’s economy

You might also like More from author

Comments are closed, but trackbacks and pingbacks are open.