Coordinating Minister Airlangga Calls RI Should Be Highly ALERt In Facing Global Stagflation

Coordinating Minister for the Economy Airlangga Hartarto (Photo: Doc. Antara)

Coordinating Minister for Economic Affairs Airlangga Hartanto reminded that the national economy should have high vigilance and be prepared for potential global stagnation.

"Observing the high uncertainty in the global economy, the national economy should have high vigilance," said Airlangga, quoted from Antara, Friday, December 9.

Vigilance needs to be increased because entering the last quarter of 2022, it turns out that the global economy is still facing a slowdown in economic growth.

The projection of global economic growth by a number of international institutions shows that this year it will be in the range of 2.8 percent to 3.2 percent.

In fact, he continued, it will be cut sharply for next year from what was originally expected to be in the range of 2.9 percent to 3.3 percent to only 2.2 percent to 2.7 percent.

The global economic capacity to recover from the COVID-19 pandemic is also coupled with the latest challenges in the form of a surge in inflation, tightening liquidity and interest rates, stagflation, geopolitical turmoil, climate change as well as a crisis in the energy, food and financial sectors.

High uncertainty as a result of this condition also puts the global economy in a perfect storm vortex or the perfect storm, resulting in a global recession threat in 2023.

"The COVID-19 pandemic shows us that global solidarity is not just jargon. Nothing is really safe until the whole world is safe," said Airlangga.

The signal for the weakening of the global economy is also reflected in the slowdown in the global Purchasing Managers' (PMI) which was at the contraction level of 48.8 in November 2022 after 49.9 in the previous month.

Many countries have technically entered the level of PMI contraction since July 2022 even until November such as China 49.4, England 46.5, the United States 47.7, Japan 49 and Germany 46.2.

Although the pressure on the price side has begun to subside, the decline in manufacturing performance globally is also the result of weakening the output index and the issuance of manufacturing sector concerns about future economic prospects.

However, the growth of all ASEAN manufacturing sectors in November 2022 was maintained at an optimistic level, namely 50.7, even most of which showed expansion levels such as Singapore 56, the Philippines 52.7, Thailand 51.1 and Indonesia 50.3.

Meanwhile, the supply disruption, especially in the energy and food sectors due to the pandemic and geopolitical turmoil, has made the global inflation rate creep up at a high level.

The surge in inflation, which was then responded to by a number of countries by imposing a tightening of monetary policy through increasing interest rates, ultimately puts more pressure on the global economy.

In October 2022, high inflation was recorded to still occur in a number of countries such as Argentina 88 percent, Turkey 85.5 percent, Russia 12.6 percent, Italy 11.9 percent, the UK 11.1 percent and the European Union 10.7 percent.

"The high stock round effect in inflation levels will be felt in the stabilization of the trade balance due to the decline in export demand," said Airlangga.

These various pressures will bring potential stagflation and other challenges such as weakening the global labor market due to decreased real wages and demand for credit.