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Jakarta (ANTARA News) - Bank Indonesia (BI) believes the downgrading of the US debt rating will not have a significant effect on Indonesia`s economy in the short run but it would be different in the medium and long terms.
"Its short-term impact on Indonesia will not be big but clearly the global economic situation and conditions will change and it will certainly have an impact on global economic growth in the medium- and long-term ," BI Deputy Governor Halim Alamsyah said here on Monday.
Quoting world economic experts` predictions Halim said the US and Europe would enter into a slow economic growth zone like what Japan has experienced and it would last long.
"That is because of political conditions in which no one would submit just like in Japan before," he said.
Halim said however that the conditions would not affect Indonesia much because Indonesia has not been very dependent on the US and Europe in the past few years as it has so far relied more on domestic demand.
"So the impact of the crisis in the US and Europe would not be too big. It will of course affect the country in the medium-term. But we can overcome it with domestic investment activities especially in the infrastructure sector," he said.
He said in the long-term the US dollar exchange rate would continue to depreciate and Indonesia perhaps has to continue to meet inflows of foreign capital seeking a lucrative place. "Indonesia will be one of capital inflow destinations," he said.
Regarding the decline in the Indonesia Stock Exchange index since Friday economic observer Mirza Adityaswara said that it was merely driven by panicking stock market players.
"It commonly happens when stock market players panic," he said.
The IHSG continued to drop to 3,700 on Monday afternoon after staying at 3,900 last Friday and rising to 4,170 before.