A ‘breath of fresh air’ for business?: Why Indonesia and Thailand watch how the US Fed moves

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Economy Nouvelles

Indonesia,Thailand,Business

The US central bank's actions are impacting not just regional economies, but also local businesses and laymen.

The US central bank's actions are impacting not just regional economies, but also local businesses and laymen.New: You can now listen to articles.JAKARTA/BANGKOK: Business has been tough over the past few years for Mr Budiarto Tjandra, a manufacturer and exporter of Adidas shoes since 1988.

The United States Federal Reserve’s decision to cut interest rates by 50 basis points - or half a per cent - on Sep 18 was evidence of the world’s biggest economy easing off from a prolonged and aggressive bid to control inflation.The waves made by the decision were quick to land in Southeast Asia. And businesses and consumers alike are preparing for the potential effects.

Differing policy responses this time around highlighted the delicate domestic considerations both countries face. The central bank had anticipated the Fed’s move, so it adjusted its own policies hours before, explained Mr David Sumual, chief economist of Bank Central Asia , Indonesia’s largest private bank.

capital Bangkok, every weekday morning, Ms Chonnikarn Chintanaroj is greeted by messages in her family’s WhatsApp group chat. “The Thai baht, it’s been getting stronger. To put it the easiest way, basically, we get less money,” she said. Thailand’s recent currency scenario is not isolated - the Indonesian rupiah, Malaysian ringgit, Singapore dollar and Chinese yuan have all also strengthened in recent weeks, a small potential silver lining for Bangkok.

Waning consumer confidence in Thailand has been fuelled by the increased costs of regular household goods like food and drink, electricity and petrol. But Ms Tay expects the central bank to remain cautious. “Over-borrowing by households, especially for non-investment purposes, has led to high levels of debt.BORROWERS WAITING FOR A DROP

Ms Chutima has since taken out another loan for a new property with her husband. For Ms Mallika, who is on a single income, making a further investment in this economic situation would be a daunting task. In Indonesia, Mr Budiarto from PT Panarub Industry told CNA he believes his loan payments will decrease, if and when commercial banks reciprocate a rate reduction.

Some 74 per cent of property buyers in Indonesia make purchases through mortgages, according to Mr Bambang Ekajaya, deputy head of the Indonesian Real Estate Association .“The economic conditions in Indonesia, post-COVID, have caused the middle class to decline by almost 9.5 million people, making the property market struggle more,” said Mr Bambang who also owns real estate company PT Cipta Graha.

“I hope the positive impact can really be felt. Because lower interest rates can stimulate purchases, primarily through credit schemes with more competitive interest rates,” he said. “The pain point for us is that we need to be careful about our work and about our income. If something is unstable, what will happen to us as a family? I feel like we’re already stuck,” she said.“The impact of the Fed rate cannot be felt directly for now. Even though Bank Indonesia has also cut its interest rate, our loans to the bank do not automatically decrease.

 

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