By: Ardi Wirdana
As Indonesia trended the hashtag #KamiTidakTakut (we are not afraid) on social media, the country’s economy seems to be showing the same spirit of robustness. While a slight dip in the economy is expected, experts believe that economic conditions will recover very quickly.
At around 11.00 a.m. on Thursday, a series of explosions and gunfire occurred in the Sarinah area of Central Jakarta. Seven people, five perpetrators and two civilians, were reportedly killed after unknown gunmen opened fire and detonated six bombs in front of a Starbucks cafe and at a police post near the Sarinah department store in Central Jakarta.
At midday on Thursday, an hour or so after the attack, the Jakarta Composite Index, or JCI, fell 1.7 percent to 4,459.32, and slumped even lower to 4,513.18 at the closing trade.
The rupiah also weakened on Thursday, reaching 13.981 per US dollar from 13.835 at closing trade the previous day.
Despite the slight decline, officials and experts believe that the economic impact of the terror strike will be short-lived.
“I think this weakening is temporary. What matters most is that we still have a strong fundamental macro (economy) that can recover this temporary condition to the normal condition,” Finance Minister Bambang Brodjonegoro told local media.
Bank Indonesia also emphatically showed on Thursday that it, like the rest of Indonesia, refuses to fall into panic over the terror attack.
The central bank was set to announce a considerable cut in its benchmark interest rate, for the first time in 12 months, on Thursday to provide stimulus to the economy, which is currently under pressure from a weakening rupiah
Just a few hours before the decision was due to be released, news of terrorist bombings at the Thamrin area of Central Jakarta broke. The fact that the central bank went on to announce its 25 per cent interest rate cut as planned, without hesitation or delay, indicate that it was confident that such terrorist attacks would have little long-term repercussions for the Indonesian economy.
A Brief Blow to Tourism
The bigger impact, as Indonesia has learned from previous terrorist attacks, will be felt in the tourism sector.
Indonesia’s last major bomb attack was the JW Marriott and Ritz Carlton Hotel bombings on July 2009, which killed nine people including seven foreigners. Following the attack, Indonesia experienced a period of strain in its tourism industry.
“As time goes on it (the impact) will reduce. We experienced it for example with Marriott (attack). At first the impact is really felt, especially given the fact that there were foreign victims. But after a while of course the impact will lessen,” says Coordinating Maritime Affairs Minister Rizal Ramli, whose ministry oversees the tourism industry.
Tourism Minister Arief Yahya will need to quickly learn how to recover the image of Indonesia as a tourism destination following such brutal acts of terror in the country.
He said that the ministry will try to learn from Thailand, one of Southeast Asia’s top tourism destinations which was recently struck by a deadly terror attack. For the time being, however, the ministry has decided to deactivate all of its tourism campaigns until the situation in Indonesia is back to normal.
“Today all (Indonesia) tourism adverts and promotions all over the world will be stopped for a week. Then we will see, if the situation is back to normal, we will resume the Wonderful Indonesia promotion everywhere,” he said.
Difficult Year Ahead?
Economists Ichsanuddin Noorsy warned, however, that although the impact of the attacks may not be huge, it will only add to numerous other factors accumulated early in 2016 that would effectively put brakes on the growth of Indonesia’s economy.
“We have not reached full speed at the start of 2016, but Indonesia is already facing the threat of a world economic recession. This is marked by the devaluation of the Yuan, the falling price of oil which could reach below US$ 20 per barrel, and a World Bank correction on world economic growth from 3.3 percent to 2.9 percent,” he told Asean Today.
Ichsanuddin, who is also an advisor to the parliament, added that following the threat of recession and the Sarinah bomb attack, he is forced to revise his prediction on Indonesia’s economic growth for 2016, which he says is a moderate prediction, as compared to the government’s target of 5.3 per cent growth.
“My prediction before the recession threat and bomb attack was growth of 4.8 – 5.2 per cent. Now my prediction is that it will only be 4.7 – 5.0 per cent,” he said.