Moody’s Investors Service said so far, Indonesia is also less exposed to slowing global trade when compared with other economies in Asia Pacific, although lower global commodity prices will weigh on growth.
The Indonesian economy, it said, is primarily domestically driven, with consumption and investment comprising about three-fifths of overall economic output. “Despite its strengths in various commodity-related industries, and as a major exporter of coal, palm oil and rubber, trade openness is low compared with several other economies in the region.”
As a result, Moody’s said, Indonesia is among economies in the region that will be less impacted directly from ongoing trade tensions between the US and China. However, China is Indonesia’s largest trading partner, accounting for 17.6% of its total trade flows.
Reportedly, about 40% of Indonesia’s exports to China are mineral products and raw materials, such as coal, lignite, palm oil and petroleum products. This suggests that if final demand from China falls, Indonesia’s export growth will be compromised.