Impact of Global Financial Crises on the Indonesian Economy:An Input-Output Analysis

The debt crisis in the European Union (EU) and the U.S. has significant potential impact on the economy of Indonesia. U.S. sub-prime mortgage crisis in 2008 has a strong impact on Indonesian economy, that Indonesia’s gross domestic product (GDP) slowed down to below 5% during 2009. Until October 2012, Indonesia’s export growth is starting to grow negatively on some sectors when the crises in the EU and the U.S. have started or overall grew by -6%. Although the slowdown does not occur in all sectors, the impact spreads to other sectors as the existence of industrial linkage among sectors. The objective of the study is to look at the impact on the sector level on various indicators such as GDP value added) and employment. Input-output analysis will be used in the simulation. Indonesia input-output table of 2005 is applied as the data base. The simulation results show that if exports decline occurs in the U.S., the economic growth will be -0.20%. Meanwhile, if it occurs in the EU, the growth of GDP will be -0.24%. If some Asian countries face the fall of demand of Indonesian export, GDP growth declines by 0.61%. The fall of exports demand from some Asian countries, EU countries and the U.S. will cause the GDP growth by -1.06%. The crisis occurring in both the US and the EU has decreased export demand from those countries and region including some Asian countries. The impact to employment seemed to be minimal, only -0.47% of total labour force. Keyword: input-output analysis, financial crisis, GDP growth