KADIN Identifies Six Global Economic Pressures Threatening Indonesia
The chairman of the Indonesian Chamber of Commerce and Industry (KADIN), Anindya Novyan Bakrie, said geopolitics is not solely a matter for diplomats and the defence sector, but also affects businesses.
He outlined six global economic pressures affecting domestic economic activity: geopolitical turbulence, energy prices, slowing world trade, supply-chain disruption, trade wars, competition in the global economy and technological disruption.
“First, clearly, geopolitical turbulence has pushed energy prices higher. We know Brent crude briefly exceeded US$126, and it is still around US$102,” Anindya Bakrie said at a KADIN event at the Trigata Lemhanas building in Jakarta on Saturday (10 October 2026).
He said the situation not only makes economic growth more difficult, but also creates volatility and makes forecasting harder. The impact is therefore felt not only in prices, but in their movements and fluctuations.
The second pressure, Bakrie said, is supply-chain disruption. Since tensions around the Strait of Hormuz, the cost of shipping goods by sea has risen by as much as 50 per cent.
“This has caused war-risk premiums to surge to between 0.25 and 1 per cent of logistics costs, meaning the total impact can reach 5 per cent. This will of course affect inflation, as well as sellers’ capacity and customers’ ability to buy,” he said.
Third is the trade war. Bakrie estimated that its impact could amount to US$2 trillion in lost global economic output by the end of 2027, amid continued instability in the world economy.
“Because there is still considerable volatility in the Middle East, between Ukraine and Russia, and elsewhere, the figure is US$2 trillion. Our exports to the United States are also affected: US$28 billion a year is subject to a 19 per cent tariff,” he said.
Bakrie’s fourth pressure is the slowdown in world trade. Growth, which had previously reached 4.6 per cent, is now estimated at just 1.9 per cent. He said this reflects a sharp deterioration in the 2026 global trade outlook amid protectionism.
The fifth factor is competition for investment, with countries vying for global foreign direct investment (FDI) flows in 2025. Inflows to Southeast Asia, however, have been stagnant at US$228 billion.
“US$1.6 trillion is being competed for, and Southeast Asia, where we are, receives US$228 billion, or around 15 per cent,” he said.
Bakrie said that even though Southeast Asia’s economic growth is strong, competition means Indonesia’s share of investment is also roughly 15 per cent.
“The last [pressure] is technological disruption, which we often hear about now in relation to artificial intelligence. It could create a US$1.5 trillion market, but because much of its control is overseas, specifically in the United States, China and Taiwan, it could produce new winners who dominate the economy,” he said.
Indonesia has yet to escape the middle-income trap
Bakrie went on to discuss the state of Indonesia’s economy and business sector. He said the domestic economy was growing despite a range of shocks in the ‘new normal’, with growth reaching 5.29 per cent in the second quarter of 2026.
He said this showed Indonesia was among the contributors to global growth, but agreed with President Prabowo’s assessment that this was not enough.
“That is right: it is not enough. If we want to escape the middle-income trap, we need to move from US$5,000 per capita to US$15,000 — a threefold increase in 20 years. To go from US$5,000 to US$15,000 in 20 years, we need growth of 8 per cent,” Bakrie said.
Domestic exports totalled US$282 billion. Exports from coal, palm oil and iron or stainless steel businesses currently account for US$60 billion.
“The remaining US$240 billion is produced by many other players, including small and medium-sized enterprises. At KADIN, our focus is on how to keep that US$240 billion growing among the businesses we have identified,” he said.
Bakrie also rejected claims that foreign investors were shunning Indonesia. He said foreign capital inflows in the second quarter of 2026 were about 27.5 per cent higher than a year earlier.
He added that employment continued to grow, although Indonesia needs to create four million jobs a year to sustain growth of 5 to 6 per cent. So far, 1.4 million jobs have been absorbed, he said, leaving much work to be done.