The debt of the United States (US) penetrated USD 31.4 trillion or around IDR 460 thousand trillion at an exchange rate of IDR 14,900 / USD. From the nominal amount and the current crisis, the US is threatened with default. To anticipate this failure, the US is currently trying to consolidate steps to increase the debt ceiling. Director of the Center of Economic and Law Studies (Celios), Bhima Yudhistira said the consequences of this policy would have an impact on cutting government spending and being able to reduce domestic consumption.
"If that happens, Indonesia's export performance could decline. The US is an important trading partner, and Indonesia's manufacturing hub apart from China, Japan and India," he said, Tuesday (5/4/2023).
Bhima further explained that the decline in demand for exports to America was feared to have an impact on domestic industries. Because the US alone is the second largest non-oil export market share for Indonesia, after China.
Several domestic industries that have trade relations with America include the textile industry, footwear, processed CPO rubber products, furniture, fishery products, and leather goods. From his observations, during 2017-2021 exports of apparel to the US market were -3%, footwear -1%, and leather goods -3%.
"After all, the US is a traditional export partner with a share of 9.2% during January-March 2023. The condition of declining export demand could cause widespread mass layoffs throughout 2023, not only in the manufacturing sector but also the plantation and mining commodity base," Bhima continued.
Based on data from the Central Statistics Agency (BPS), in February 2023 Indonesia's export value reached around USD 21.4 billion, or a 4.15% decrease in percentage compared to the previous month (month-on-month/mom).
The decline in the value of national exports has also occurred for 6 (six) months in a row since September 2022. When viewed from the destination country, earlier this year demand for exports fell most significantly from the United States and the European Union.
In the January-February 2022 period, the value of Indonesia's exports to the US was still able to reach USD 4.96 billion. However, in January-February 2023 the value fell 22.15% to USD 3.86 billion. In the same period, the value of non-oil and gas exports to the European Union fell 11.54% from USD 3.28 billion to USD 2.90 billion.
"Apart from exports, investment realization from the US could be disrupted because investors will be inward looking. Agreements with Tesla, for example regarding the development of batteries and electric vehicles, may be constrained," concluded Bhima.
