Global Market Uncertainty Restricts Capital Flow To Developing Countries

Economic uncertainty (unsplash)

YOGYAKARTA Director of the Economic and Monetary Policy Department (DKEM) of Bank Indonesia Juli Budi Winantya said that uncertainty in the global financial market remains high.

He explained that although there are recent developments related to tariff determination in a number of countries, global dynamics is still very volatile, triggering uncertainty in the short term, coupled with various geopolitical risks that also affect the world's financial markets.

"The flow of capital to developing countries is still continuing, the market is still continuing, although due to high quality capital the amount is also relatively limited and this capital flow is mainly in the form of bonds, in the form of bonds," he said in BI policy activities to Maintain Stability and Encourage Growth, Friday, August 22.

In addition, he also mentioned the development of the US dollar exchange rate which had strengthened but then weakened again. This is happening in line with the increasing uncertainty in the global financial market.

According to him, the development of global tariffs poses a risk of weakening the world economy which is greater than previously estimated so that Bank Indonesia has revised the projected economic growth of a number of countries.

He added that the current development of global tariff policies has the potential to weaken world economic growth from previously projected at 3 percent.

Juli explained that along with the projected weakening global economic growth, inflationary pressures also tended to decline.

Therefore, he said there was a downward trend that reflected the increasingly real risk of economic weakening, accompanied by inflation that tended to decline, including in America.

Juli explained that although tariff theory could boost inflation, on the other hand, tariffs also slowed economic growth.

"The interaction of slower growth and inflationary pressure from this tariff will continue to cause inflation in the United States to be lower and this will also happen in other countries, especially because of earlier, because the economy is not as good as we expected," he said.