1 / 25

European Crisis and The Indonesian Economy

Diskusi Panel Terbatas – BAPPENAS – Bandung, 17 November 2011. European Crisis and The Indonesian Economy. Arief Anshory Yusuf – Padjadjaran University. Trade linkage, employment, and poverty from General Equilibrium Perspective.

jett
Download Presentation

European Crisis and The Indonesian Economy

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Diskusi Panel Terbatas – BAPPENAS – Bandung, 17 November 2011 European Crisis and The Indonesian Economy AriefAnshory Yusuf – Padjadjaran University Trade linkage, employment, and poverty from General Equilibrium Perspective

  2. The impact of European crisis on Indonesia (through trade) is not that clear (+) Labour Market Adjustment/Employment (-) Factor Intensity European import Export sector European crisis Export Indonesia (+) (-) (-) (-) (-) (-) Import competing Sector Factor Intensity (-) Int’l Prices Import Indonesia European export (+) (-) Export ROW (+) Import dependent Sector Factor Intensity (+) (-) (+) (+) (-) (+) (-) (-) GDP ROW Import ROW INDONESIANECONOMY (+) Consumer Prices EXTERNALFACTORS Household Income Poverty

  3. First question: How big is the crisis?

  4. IMF-WEO2011 Forecast Source: IMF World Economic Outlook Database

  5. Comparing WEO Forecast can give us an idea of how big the crisis is Source: IMF World Economic Outlook Database

  6. Comparing WEO Forecast can give us an idea of how big the crisis is Source: IMF World Economic Outlook Database Verdict: EU GDP will likely to be 1%-2% below its baseline

  7. EU is quite an important Indonesian export market (trading partner) – Export share (%) Source: GTAP v7 Database

  8. … Yet, we are not really a very open economyExport as % of GDP Source: GTAP v7 Database

  9. Analysis – General Equilibrium Assessment (+) Labour Market Adjustment/Employment (-) Factor Intensity European import Export sector European crisis Export Indonesia (+) (-) (-) (-) (-) (-) Import competing Sector Factor Intensity (-) Int’l Prices Import Indonesia European export (+) (-) Export ROW (+) Import dependent Sector Factor Intensity (+) (-) (+) EXTERNAL FACTORS (+) (-) (+) (-) (-) GDP ROW Import ROW INDONESIAN ECONOMY (+) Consumer Prices INDONESIA-E3 Model GTAP Model A GDP shock of EU_25 by -2% Household Income Poverty

  10. GTAP: Impact on EU-Trade Volume of world trade will be 0.8% below BAU Source: Author’s calculation with GTAP model

  11. GTAP: Impact on world prices Source: Author’s calculation with GTAP model

  12. GTAP: Impact on world trade (1) Source: Author’s calculation with GTAP model

  13. GTAP: Impact on world trade (2) Source: Author’s calculation with GTAP model

  14. GTAP: Impact on World’s GDP Source: Author’s calculation with GTAP model

  15. National Model: INDONESIA-E3

  16. Sectoral impact and its employment Source: Author’s calculation with INDONESIA-E3 model

  17. EU is the biggest exporter of heavy manufacturing products Source: Author’s calculation with GTAP model

  18. Labor market impact:Formal workers win, informal workers lose Source: Author’s calculation with INDONESIA-E3 model Capital and land owner lose too.. Its impact on distribution of income is unclear.

  19. Income change seems a bit progressive in rural areas, no clear pattern in urban areas Source: Author’s calculation with INDONESIA-E3 model

  20. Deflationary effect is progressive Source: Author’s calculation with INDONESIA-E3 model

  21. All household welfare fall, but the rich suffer more.. Source: Author’s calculation with INDONESIA-E3 model

  22. Poverty impact is + but non-significant Source: Author’s calculation with INDONESIA-E3 model

  23. Concluding remarks (1) • The overall Impact of European crisis on Indonesia works through various trade channel and feedback. Its net effect is unclear. A call for a model approach. • To assess the crisis accurately, we need to apply reasonable size of the crisis. • Overall impact of the crisis on Indonesian economy is negative but small. • Indonesian traditional export like oil and gas will be hit hardest

  24. Concluding Remark (2) • Its impact on labor market and poverty depend on the sectoral adjustment process responding to the shock. • Indication on labor market impact: Decline in employment in extractive sector and food manufacturing will likely to be bigger. • Formal labor wins, informal labor lose, but so does capital and land owner. • The poor get more benefit from the deflationary effect, yet it cannot compensate the decline in income. • As a result, poverty increase, yet its magnitude is insignificant.

  25. Thank you for your attention

More Related