KUALA LUMPUR (Reuters) – Planned U.S. tariffs could reduce Indonesia’s potential growth by 0.3 to 0.5 percentage points, but a 90-day pause in implementing the levies allows time to discuss solutions, Indonesia’s finance minister told Reuters on Thursday.
Minister Sri Mulyani Indrawati said Indonesia welcomes the 90-day pause as it provided an opportunity to mitigate or avoid the downside risks from tariffs to economic growth.
“The estimated current situation, before the pause, could reduce our potential growth by between 0.3% of GDP up to 0.5%,” she said in an interview on the sidelines of the ASEAN finance ministers and central bank governors meeting in Malaysia.
Indonesia has set a 5.2% GDP growth target this year versus 5.03% achieved last year. President Prabowo Subianto, however, wants to jack up the growth to 8% by 2029.
Indonesia’s authorities have said the U.S. tariffs would have a limited impact on the economy, which relies more on the domestic market.
The U.S. was Indonesia’s third-biggest export destination as of last year, receiving shipments worth $26.3 billion, according to Indonesian government data.
Sri Mulyani said Indonesia would use the 90-day tariffs pause to come up with a framework of cooperation that was “mutually respected” by other countries.
“We have to continue to be very prudent… Expenditure should be made more efficient, well-targeted and effective in supporting growth on the monetary side.”
She said the recent pressure on the rupiah currency, which is at all-time lows, was temporary, adding the government remained focused on indicators such as corporate debt and government debt-to-GDP.
The rupiah strengthened as much as 0.83% to 16,720 a dollar on Thursday as of 0512 GMT, according to LSEG data, after hitting an all time low for two days straight since the market reopened on Tuesday.
(Reporting by Danial Azhar; Additional reporting by Stefanno Sulaiman in Jakarta; Editing by Martin Petty)
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