BI Reveals Global Economic Slowdown and Financial Market Pressure

JAKARTA - Bank Indonesia (BI) revealed that the world economy is still in a slowing trend with increasing uncertainty.

BI Governor Perry Warjiyo said that the world's economic growth in 2026 is estimated to be slightly lower at 3.2 percent compared to the 2025 achievement of 3.3 percent.

"The lower growth was mainly influenced by the continued impact of the United States (US) reciprocal tariffs and global supply chain vulnerabilities, even though the outlook for the US economy improved driven by investment in the technology sector including artificial intelligence (AI) and fiscal stimulus tax cuts," said Perry in a press conference, Wednesday, January 21.

He said that the growth of the Japanese, Chinese, and Indian economies in 2026 is expected to slow due to weakening domestic and export demand amid increasing AI investment.

Meanwhile, from the global financial market, he added that the space for the Fed Funds Rate (FFR) to decline was reduced and accompanied by still high UST yields in line with the still large US fiscal deficit.

According to him, the uncertainty of the global financial market has also increased, especially triggered by the US reciprocal tariff policy as well as the widespread escalation of geopolitical tensions.

Perry said this development resulted in an increase in capital flows to emerging markets (EM) being held back and encouraging the strengthening of the US dollar index against developed country currencies (DXY).

"These conditions require vigilance and strengthening of policy responses to strengthen the resilience of the domestic economy from global shocks and encourage higher growth," he explained.