BI Warning Five Of The Main Challenges Of The 2023 Global Economy

Illustration (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) Governor Perry Warjiyo said global conditions next year will still be filled with uncertainty.

To that end, he considered that there were at least five important points that needed to be observed.

The first is the economic slowdown. According to Perry, the growth rate in 2023 will not be better than 2022.

In fact, he believes the pressure will be greater in the next period.

"This year's global economy is expected to grow 3 percent and will decline to 2.6 percent next year," he said when answering reporters' questions, Thursday, October 20.

It was stated that the slowdown was triggered by domestic conditions in the United States which would only grow 1.2 percent from now 2.5 percent.

Then the European area that was under pressure became 0.7 percent, as well as in China which would experience a similar trend.

"This condition is coupled with a monetary tightening that will have an impact on emerging countries," he said.

Second, the inflation rate will still be high. He said, the phenomenon of skyrocketing inflation not only hit developed countries but also a number of developing countries, such as Turkey, Brazil, and Argentina.

"This is the result of geopolitical tensions and the disruption of the world supply chain," Perry said.

Third, aggressive interest rate increases in developed countries. Perry said that the Fed Fund Rate could shoot up to 4.5 percent and even grow again to touch 4.75 percent next year as the highest level.

"This increase is not necessarily and can reduce the risk of inflation because the source of the problem is not only from the aspect of demand but also the supply that is disrupted. Therefore, the risk of stagnation arises," he said.

The fourth is the increase in the Fed Fund Rate which has an impact on the strengthening of the US dollar exchange rate. Perry noted that the dollar had experienced a strengthening index at the level of 114 before decreasing to 112.

This means that the dollar strengthened 18 percent year to date. Even if calculated from the middle of last year the dollar strengthened by almost 25 percent. This is what causes the weakening of currencies around the world, including the rupiah," he said.

Fifth is the risk of investor perception. The most worrying thing from the last point is the investor's attitude that attracts funds from developing countries so that it can cause global market inconductivity.

"Especially for portfolio investment and of course piling it up in cash. Those are five points that need to be observed and become challenges around the world," concluded BI Governor Perry Warjiyo.