World Economy

Indonesia Optimistic About Financial Health

Indonesia Optimistic About Financial HealthIndonesia Optimistic About Financial Health

Indonesia will not suffer the same fate as Greece, which is in a state of default after failing to pay its debts to institutions such as the International Monetary Fund, a finance ministry official said.

“Indonesia will not go bankrupt like Greece,” Special Staff of the Finance Minister Arif Budimanta affirmed during a discussion organized by the Public Relations Division of the People’s Consultative Assembly here on Saturday, Antara News reported.

He added that the Greek fiscal deficit was 60%, while Indonesia was less than 1.9%. “In terms of economic growth, we are showing positive growth, whereas the economic growth of Greece is in the negative.”

Budimanta urged all sides to be optimistic regarding the country’s financial conditions. They should not fear unfavorable conditions as the government has adopted pro-people policies so far.

The government’s pro-people policies are reflected in the budget policy, which focuses on the development of villages. The budget allocated for this purpose was raised from Rp 9.7 trillion ($6.7 billion) in 2014 to Rp 21 trillion this year.

Earlier, Head of Public Policy and the Economic Study Center of Gadjah Mada University Tony Prasetiantono had pointed out that Indonesia was still far from facing an economic crisis at par with the one in 1998, which was triggered by the weakening of the rupiah.

“The weakening of the rupiah in 1998 had caused its value to drop to Rp 15,000 against the US dollar. It is now Rp 13,500 per US dollar. Although the figure is nearly the same, the conditions in 1998 and those now are significantly different,” Prasetiantono emphasized on July 2.

Furthermore, an economist of Standard Chartered Bank, Eric Sugandi, believes that the Greek crisis will have indirect impacts on Indonesia’s economic growth. Although not direct, the impacts will still be significant,” he remarked.

He added that Greece’s problems will not directly influence the Indonesian economy because it is not a primary investor in the country.

However, Indonesia’s economy will be affected indirectly because other countries that are business partners with Greece will feel the impacts.

Moreover, the economic growth of Indonesia will also be influenced by other external factors such as the appreciating value of the dollar against those of other currencies.

According to Sugandi, the “super dollar” phenomenon will affect financial channels, as well, while the rupiah continues to weaken with the strengthening of the dollar.

“The dollar will remain strong against the euro and currencies of other emerging markets, including against Indonesia’s rupiah. Financial channels and psychological factors will feel the impacts,” he noted.

Unless Greece pays off debts worth €1.6 billion to the International Monetary Fund, it will be declared bankrupt.

Also, several other European countries are willing to bailout Athens, stipulating requirements for a number of changes in its budget.