One of the leading ASEAN nations, Indonesia, may suffer colossal consequences if it pursues the idea of de-dollarization. The nation is highly dependent on the US dollar for multiple purposes.
While the collective ASEAN nations are busy curating their currency, launching a currency rivaling the US dollar may significantly backfire, ushering in mayhem for the ten bloc nations.
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Potential Consequences of De-Dollarization for Indonesia
Economic Implications
ASEAN nations are busy creating their currency systems. This system is being prepared to launch a unified approach to currency dynamics and, at the same time, create a contemporary currency capable of rivaling the US dollar and the euro.
Despite its grand ideations, the derailment of the US dollar can prove lethal for these nations as a collective. Indonesia, in particular, can experience stark economic implications that could wreak havoc in the region. For instance, if Indonesia pursues the idea of de-dollarization, the nation can witness its currency fluctuations, with the Indonesian Rupiah tanking to new lows.
This could lead Indonesia to witness a sharp rise in inflation, which would, at the same time, portray decreased user interest and reduced purchasing power.
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Trade Implications
A shift away from the US dollar may also have trade implications. Indonesia may face stiff resistance from nations favoring the US dollar. The dollar derailment could cause Indonesia to encounter certain trade restrictions and tariffs, which may hinder its overall expansion on a global scale. Per BIS data, the dollar helms 90% of global transactions which would be hard for Indonesia to maneuver around.
Financial And Social Implications
Similarly, Indonesia’s shift from the US dollar brings significant financial and social risks. For example, Indonesia can witness reduced access to international markets, as the nation would need US dollars to trade and invest in global markets.
The nation could also encounter high borrowing costs due to reduced investor interest. The region’s tourism sector may be severely impacted, leading to low GDP metrics.
Above all, the foreign investment portfolio in Indonesia can drastically decrease, leading the nation to document slow development and economic growth.
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Concerning social consequences, de-dollarization can also push Indonesia to encounter issues related to poverty and unemployment.
Decreased economic activity may have a domino effect on the region, leading to reduced government revenue, which may impact several public services.