UNAIR NEWS The Department of Sharia Economics Faculty of Economics and Business (FEB) recently held an online guest lecture titled Bank Indonesias Policy Response to Global Economic Dynamics. The event, conducted on Saturday, May 3, 2025, featured Firman Hidayat, a senior economist from Bank Indonesias South Kalimantan branch.
During the session on central banking, Hidayat highlighted the evolving landscape of the global economy. Since President Trump took office, his administration has implemented numerous disruptive policies, notably the imposition of high import tariffs, particularly on goods from China, he explained.
He noted that such protectionist policies are not unprecedented in U.S. history. Though the U.S. has used similar strategies in the past, the global tariff trend had been declining under the World Trade Organization. However, this pattern began to reverse during Trumps presidency, Hidayat said.
Economic consequences
Hidayat warned that Trumps tariff policies are contributing to a global economic slowdown. One of the clearest indicators of rising uncertainty, he said, is the sharp increase in gold prices, particularly in early 2025. Global uncertainty has only deepened since the imposition of these tariffs, he observed.
He added that uncertainty is also reflected in the sluggish movement of oil prices, a result of weakening global economic conditions that have dampened demand and are likely to keep pressure on oil prices moving forward.
Another major indicator, Hidayat said, is capital flow. When global uncertainty rises, investors tend to pull out from emerging markets and redirect funds to more stable regions such as Japan and Europe. In addition to reduced capital inflow to emerging markets, even the U.S. is seeing a decline in foreign capital, he remarked.
Domestic impact
According to Hidayat, global disruptions can influence Indonesias economy through three primary channels. The first is trade, which may experience both direct and indirect effects. Directly, U.S. tariffs lower demand for Indonesian exportsespecially textiles. Indirectly, these policies affect Indonesias trading partners, which then impacts Indonesias own trade performance, he said.
The second channel involves financial markets, particularly foreign capital movements and investment relocation. High tariffs on Chinese products may push investors to shift production to other countries, including Indonesia. Investment relocation is a real possibility when producers seek more affordable alternatives due to rising costs, Hidayat added.
Despite global uncertainties, Indonesias economy remained stable in the first quarter of 2025. Household consumption remained strong, supported by government spending, holiday bonuses (THR), and other fiscal measures. Non-construction investment also continued to rise, reflected in increased imports of capital goods, particularly heavy equipment. Hidayat credited this resilience to sound monetary, macroprudential, and payment system policies.
Bank Indonesia maintained its key interest rates: the BI Rate at 5.75 percent, the Deposit Facility Rate at 5.00 percent, and the Lending Facility Rate at 6.50 percent. These decisions aim to preserve exchange rate stability in line with our economic fundamentals, he concluded.
Author: Rizma Elyza
Editor: Yulia Rohmawati
