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Why did Indonesia’s stock and currency markets fall?
Indonesia’s markets dropped following the cabinet reshuffle and widespread protests because investors saw increased political risk and uncertainty. Violent unrest, public dissatisfaction over economic hardship, and concerns about government stability all contributed to a loss of confidence, leading to declines in stocks and the rupiah.
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Could political unrest spread to other countries?
Yes, political unrest can sometimes spread, especially if neighboring countries share similar economic or political issues. Regional instability, economic ties, or shared grievances can trigger protests elsewhere, which can further impact regional markets and investor confidence.
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What does this mean for international investors?
International investors may see increased volatility and risk when political unrest occurs in a major economy like Indonesia. They might reconsider their holdings, seek safer assets, or adjust their strategies to account for potential disruptions in markets and currency values.
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How do governments stabilize markets during crises?
Governments often intervene by implementing monetary policies, providing fiscal support, or reassuring investors through public statements. Central banks may also step in to stabilize currency markets, and governments might introduce reforms to restore confidence and prevent further unrest.
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What are the long-term effects of political unrest on a country’s economy?
Long-term effects can include reduced foreign investment, slower economic growth, and increased debt. Persistent instability can damage a country’s reputation, making it harder to attract investment and leading to ongoing economic challenges.
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Can political unrest lead to economic collapse?
While not always, severe and prolonged unrest can threaten a country’s economic stability, potentially leading to a collapse if it disrupts key industries, causes capital flight, or results in loss of investor confidence. However, many countries recover with effective policies and reforms.