China Claims to be Entering Stagflation, What About Indonesia?

Specter stagflasi now haunts a number of other countries, including China. However, it is estimated that this specter is still not approaching Indonesia.

China, which is the country with the second largest economy in the world, is expected to begin to suffer from stagflation due to soaring inflation but not accompanied by rapid growth.

Stagflation is an economic situation where inflation continues to skyrocket while economic activity stagnates or even slows down.

This phenomenon was first identified during the oil crisis of the 1970s. The crisis triggered an increase in prices but economic growth plummeted.

In China, signs of a slowdown in China are starting to show Purchasing Manager’s Index (PMI) Manufacturing last month which fell from 49.2 points, from 49.6 the previous month.

This indicates that the performance of factories in China is still contracting. In fact, as is known, the panda country relies most of its economy on the manufacturing sector.

Based on data from China’s National Bureau of Statistics (NBSC), the October Manufacturing PMI index is a continuation of the weakening period that has been going on since last April.

Last month’s performance also recorded a second straight month of contraction.

The chief economist at Pinpoint Asset Management said the production index had fallen to its lowest level since it was published in 2005. This excludes performance during the 2008 global financial crisis and the Covid-19 outbreak in February last year.

In contrast, the output price index has risen to its highest level since 2016.

“These signals confirm that the Chinese economy is likely already experiencing stagflation,” he wrote in a note. CNBC International earlier this week.

Bank Permata chief economist Josua Pardede said stagflation is synonymous with developed countries. This is because they tend to have low economic growth.

In contrast to developing countries where economic growth tends to be high.

For this reason, according to him, there is little possibility for China to stagflation, as well as in Indonesia.

“In Indonesia, I think we are far from stagflation. In terms of our country’s status as a developing country, our economy should grow normally at around 5%, especially with structural reforms that can encourage even faster growth,” said Josua to, Thursday (11/11).

According to him, developing countries still have great potential to continue to grow.

This is in contrast to a number of developed countries in Europe or Japan, which have had limited economic growth for a long time.

Therefore, with the energy crisis which then triggered a severe spike in inflation in the euro zone, the threat of stagflation emerged.

On the other hand, the economy of this region in normal conditions growth is also low. Therefore, Josua said stagflation is more likely to plague European countries.

It’s different with the US. Even though it is a developed country, Josua believes that Uncle Sam’s country still has the resources to continue to grow.

Therefore, although inflation in the US has skyrocketed in recent months, the potential for stagflation is minimal.

In line with Josua, CORE Indonesia Executive Director Mohammad Faisal said that China is actually still far from stagflation.

When compared with other countries, China’s economic growth is even higher than Indonesia’s.

China managed to grow 4.9% in the third quarter of 2021, while Indonesia only grew 3.51%.

“But indeed for China, although it is not negative, its slowing economic growth will have a big impact, both domestically and globally,” Faisal told reporters.

However, even though the stagflation is not yet official, Faisal said that the current condition of China’s economic slowdown will have an impact on Indonesia. The impact is mainly from the export-import aspect.

The economic slowdown in China will erode the demand for Indonesia’s export commodities. This will certainly be felt, given that more than 20% of Indonesia’s export value goes to China.

Likewise, in terms of imports, China is Indonesia’s largest exporter, especially for capital goods and auxiliary raw materials.

Faisal said that the current increase in inflation will push up the prices of imported goods, which at a later stage can cause production costs to also rise.


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