There are several sectors in Indonesia that are most vulnerable to the global economic recession. Especially those that depend the most on exports, such as coal to textiles. Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal said Indonesia has the potential to be affected by the global recession. Export demand will be reduced from countries that are entering the brink of recession. "So those who depend more on the export market, especially exports to countries hit by the recession, are the most vulnerable," said Faisal, Wednesday (28/9).
Several sectors are predicted to be vulnerable to recession, such as coal. However, as long as there is a Russo-Ukrainian war and orders for black gold are still high, the price will not drop too significantly.
"For coal, as long as there is political tension in the global market, it is possible that the price will not fall too significantly," said Faisal.
In addition to the coal sector, the automotive sector has the potential to experience a decline in performance. This is because most of the automotive market is overseas. Not only that, the textile and footwear sector will also be affected. The reason is, these two sectors also rely on export markets to the US.
Faisal said the US was indeed one of the export destinations for Indonesian products. Therefore, if the US economy weakens, the demand for products from Indonesia will also decline.
Data from the Central Statistics Agency (BPS), the US became the second largest export destination after China in August 2022. The value of Indonesia's exports to the US was US$ 2.59 billion or 9.87 percent of total exports. Meanwhile, Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira said that the domestic investment sector will also be hit if a global recession occurs.
According to him, the inflation rate, which is higher than economic growth, puts pressure on the real sector. The pressure in the real sector made investors turn to safer assets. Moreover, an increase in the benchmark interest rate will also hamper economic growth. The problem is, the monetary tightening policy will make credit interest more expensive.
If that's the case, the company will usually reduce the application for working capital loans to banks in order to reduce the cost of debt. In other words, many companies have the potential to delay expansion plans, so the industry is running slowly at home
"In real terms there is also pressure, investors will go to safer assets," said Bhima.
Furthermore, he also agreed with Faisal, that the automotive, electronics, property, textile processing, apparel and footwear sectors were the most affected. According to him, this was due to the weakening of people's purchasing power due to rising prices of goods. Meanwhile, their income is not significant. As a result, the middle class refrained from spending in a global recession.
In addition, the boom in commodity prices may soon end and result in weakening export performance and people's incomes in the mining and plantation sectors.
Bhima added that rising interest rates also slowed demand for mortgages and motor vehicle loans.
Previously, Finance Minister Sri Mulyani ensured that the world would fall into a recession next year. This is because many central banks have raised their benchmark interest rates in order to suppress inflation.
The state treasurer highlighted that the economic growth of a number of countries began to slow down in the second quarter of 2022. Some examples are the United States (US), Germany, China, to the UK.
However, he still believes the Indonesian economy is fine. This is because Indonesia's GDP grew 5.44 percent in the second quarter of 2022 or higher than the first quarter of 2022 which was 5.01 percent.
