World Economy Gets Congested, BI Boss Says Global Growth Could Drop To 3.8 Percent

Illustration (Photo: Doc. Antara)

JAKARTA - Governor of Bank Indonesia (BI) Perry Warjiyo revealed that there are more economic challenges that must be faced by countries in the world by considering the current situation.

According to him, this can be seen from the increasing uncertainty in financial markets, along with the escalation of geopolitical tensions between Russia and Ukraine.

"The escalation of geopolitical tensions followed by the imposition of sanctions from various countries against Russia affected trade transactions, commodity price movements and global financial markets, amid the spread of COVID-19," he said while giving an online press statement on Thursday, March 17.

Perry explained that growth in various countries, such as Europe, the United States (US), Japan, China, and India has the potential to be lower than previous projections.

“Previously, global economic growth was estimated at 4.4 percent. However, with the latest developments, it could drop to 4.2 percent or even 3.8 percent," he said.

Furthermore, the BI boss said that world trade volume is also likely to be lower than previously estimated in line with the risk of stalling global economic recovery and ongoing supply chain disruptions.

He said global commodity prices were rising, including energy, food and metal commodities, thus putting pressure on global inflation. The escalation of the Russia-Ukraine geopolitical tensions has added to the uncertainty of global financial markets.

"The US central bank also contributed to the increase in interest rates and accelerated normalization of monetary policy in other developed countries, in response to rising inflationary pressures due to rising energy prices," he said.

"This has resulted in limited capital flows, along with the risk of reversal of capital flows to safe-haven assets, and pressure on the exchange rate of developing countries, including Indonesia," concluded Perry.