US-UK Attack Houthis in Yemen, What is the Economic Impact for Indonesia?

US-UK Attack Houthis in Yemen, What is the Economic Impact for Indonesia?

The situation in the Red Sea continues to heat up following the conflict between the Yemeni Houthi group and US and British troops. This is also believed to have an impact on global trade considering that the waters of the Red Sea are a strategic route through which 12 percent of world trade passes.

Director of the Center of Economic and Law Studies (Celios) Bhima Yudhistira said that the conflict in the Red Sea had a high risk impact on Indonesia, especially the performance of exports to the Middle East and North Africa. Although the Houthi attack as an effort to defend Palestine was aimed at cargo ships from western countries, especially the US, the impact also gave fear to other countries.

Of course the effect cannot be underestimated. "The world is currently experiencing supply chain fragmentation, coupled with logistical disruptions, what is happening is delivery delays which are detrimental to many parties," said Bhima to Republika, Sunday (14/1/2024).

Bhima continued, the impact could increase logistics costs and make it difficult to send raw materials and finished goods. For this reason, the Indonesian government needs to be alert and continue to monitor the situation in the Red Sea and anticipate if the situation worsens.

He believes that if a commodity cargo ship such as oil is attacked, energy prices will increase drastically and affect energy subsidies in Indonesia.

"Even though the impact is still small and depends on how long the conflict in the Red Sea lasts, the increase in oil prices is estimated to be around 75-78 US dollars per barrel, but it will still be difficult to break above 80 US dollars per barrel because demand has largely decreased," he said.

Apart from oil, he said, there are CPO, coal and iron ore which will increase. According to him, the short-term impact will be changes in logistics routes, then security and insurance costs will increase.

"The impact is that logistics costs will become more expensive. If conditions worsen, it is possible that export destinations in countries around the Red Sea will experience a slowdown. Export pressure for Indonesia this year is already heavy, traditional markets are projected to see a decline in domestic demand, especially China. Unfortunately, the market is shifting to the Middle East and "North Africa is hampered by security instability," he said.

The US and British militaries launched a missile attack targeting Yemen's Houthi group on Friday morning. The attack was in response to Houthi attacks on merchant ships thought to be linked to Israel in the Red Sea. This situation has disrupted trade routes in the Red Sea.

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