The war between Russia and Ukraine does not look like it will end anytime soon. In fact, the war started by the Russian attack has been going on since February 24 and killed at least 4,100 people.
This protracted conflict in fact has a comprehensive effect on the world. The war-affected the political situation, food, to the economy in all parts of the world, including Indonesia. The impact felt the most by Indonesia is in terms of business.
The war also had an impact on the economic aspect. This is because Russia and Ukraine are the world’s main commodity producers and exporters. Several types of oil and gas, mining, to food mostly come from these two countries.
The conflict between the two countries disrupted the production and distribution of various commodities. What’s more, many countries have imposed embargoes on Russian products. This disrupted the supply of world commodities.
Margo Yuwono, Head of the Central Statistics Agency, in a press conference on Thursday (2/6/2022), stated, “The global supply chain has been disrupted due to the war. Prices of various commodities have risen,”
To reduce prices at the domestic level, continued Margo, several countries have imposed export restriction policies. Thus domestic supply will be adequate so that prices can be controlled.
“There were 10 countries that imposed restrictions on food and fertilizer exports during the Russia-Ukraine crisis. Six countries restricted food exports and four restricted fertilizers,” said Margo.
Furthermore, the impact of the war was most felt by business people in Indonesia. Like in other countries, the business world of Mother Earth also finds it difficult to get raw materials for production.
In May 2022, S&P Global reported manufacturing activity as measured by Indonesia’s Purchasing Managers’ Index (PMI) at 50.8. A PMI score above 50 indicates that the business world is still in the expansion phase.
However, the pace of expansion is slowing. The manufacturing PMI of 50.8 was the lowest in nine months.
“Towards the second quarter, manufacturing businesses signaled that production might drop slightly. The reason is the problem of raw material supply. The longer delivery time, coupled with rising prices, will hamper the performance of the Indonesian manufacturing sector,” said Jingyi Pan, Economics Associate Director. S&P Global Market Intelligence, in a statement.
BPS also provides evidence that the Russo-Ukrainian war has penetrated the business world. Inflation at the producer level (Whole Trade Price/HPB) in May 2022 was recorded at 4.23% compared to the same period the previous year (year-on-year/yoy). The highest since November 2018.
“On the industrial side, the increase occurred in wheat flour, beef, and instant dry noodles. It can be said as a response to prices at the global level.
“The price of raw materials has increased. Global price developments have spread to us, although they are still at the HPB level, they have not yet fully entered consumer prices,” explained Margo.
