BI Uncovers Global Uncertainty, World Economy is Under Pressure

JAKARTA - Head of the Macroprudential Policy Department of Bank Indonesia Solikin M Juhro said that the global economy is currently facing an increasingly high level of uncertainty due to a combination of economic, political, and geopolitical factors.

According to him, global pressure does not only come from economic slowdown, but also increasing political tensions, tariff wars, as well as geopolitical risks such as the Ukraine conflict and fragmentation of international trade.

He added that this condition has encouraged the simultaneous increase in global policy uncertainty and geopolitical risks.

"Policy uncertainty is also high, including combined with geopolitical risk, political aspects, trade aspects and this so that global policy uncertainty is also high. Well, this is what we are really facing a situation that is really very challenging," he said. in a media briefing entitled Assessment of the Effectiveness of Macroprudential Policy in Stimulating Credit Growth in 2025, Monday, December 22.

He added that the trend of trade protectionism and the fragmentation of the global economy also slowed down world economic growth.

According to him, the pattern of international trade is now shifting from multilateralism to cooperation in small groups or bilaterally.

In addition, Solikin said the high public debt in a number of countries, including the United States, widened the fiscal deficit which must be financed by debt, thus suppressing expectations of a decline in global interest rates.

According to him, the perception of high US fiscal deficits also affects global financial market conditions.

He added that another risk of concern is the increasing vulnerability of global financial markets due to the role of non-bank financial institutions (Non-Bank Financial Institutions/NBFI) which have a high leverage rate but have not been strictly regulated.

According to him, this includes hedge fund activities and the development of digital assets such as stablecoins which are considered still vulnerable.

Solikin said that the combination of these various risks, in the end, has an impact on slowing global economic growth.