Global Financial Crisis for Four Important Economic Sectors in Indonesia

Topics: Subprime mortgage crisis, Financial crisis, International trade Pages: 5 (1741 words) Published: May 21, 2013
Global Financial Crisis
for Four Important Economic Sectors in Indonesia

The global economic crisis that occurred in several countries of the world in economy sector has resulted in higher volatility in weaker economic growth. European region in the global have monetary crisis that caused by the national debt of Greece, also Ireland and Portugal have same problem, and eventually affected almost the entire European Union, the political deterioration of Countries in the Middle East, the nuclear issue in Japan that could interfere with the industry in Japan, and economic growth of United States is weak. The global financial situation is getting worse is a major threat to Asia, especially Indonesia which had received the impact of financial crisis in previous years. The main impact that will happen in Indonesia is the financial sector and the trade sector is particularly vulnerable to the effects of the crisis. The rupiah weakening due to global economic crisis will make imports more high performance than exports. Indonesia became one of the countries that will have a negative impact of the recession-decline in trading activity the United States. The global financial crisis that is too long cause other effects that are marked by the withdrawal of funds in foreign currency especially the United States dollar by financial institutions, creditors and investors in the United States. Withdrawal is made by selling shares and securities are debt securities previously purchased in dollars. Withdrawal of funds is also done by withdrawing the funds that have been placed on banks in Indonesia. This financial crisis led to funds repatriated, causing large amounts of equity and debt securities in large quantities. Instability of commodity prices will make investors lose confidence to Indonesia for cooperation in the long term that resulted in investors looking for alternatives to face the global financial crisis. Subcontracted workers and workers is one of the people who have a direct impact of this global financial crisis. The global financial crisis is a major threat which will impact on four important economic sectors in Indonesia

The impact of global financial crisis will affect Indonesia economy in the exchange rate continues to decline. The rupiah will weaken due to the global economic crisis will make imports higher than exports. It is inseparable from the total decline in investor confidence in the domestic market who participated contributed to the demand for dollars rose significantly. Depreciation of the rupiah is not only caused by the withdrawal of funds, but also potentially greater than the depreciation of currencies outside the dollar. Shrinkage occurs in almost all currencies outside the dollar as the dollar pulled back to back liquidity of United States companies. Exchange rate volatility will have an impact on price increases or inflation is high, as well as the rationale and expectations of high inflation, which in turn will be realized on the rise in prices or inflation continues to rise and the exchange rate.

The inflation rate in Indonesia was recorded at 4.50 percent in June of 2012. Indonesia Inflation Rate averaged 12.3 Percent and a record low of -1.2 Percent in March of 2000. (1)

This situation raises the desire of investors to do currency substitution of the rupiah to the dollar. Under these conditions, all possibilities can potentially lead to economic fluctuations of the rupiah against the dollar. In such conditions the weakening rupiah, this condition should used to suppress the performance of import based on priority needs and increase exports. Global financial crisis has the potential to make the exchange rate in conditions of uncertainty and the resulting affect aspects of Indonesia economy.

Decrease levels of consumer confidence, investor, and the market for financial institutions in Indonesia. With the global conditions that are experiencing financial crisis, causing investors to look...
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