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View all search resultsThe risks surrounding Indonesia’s economic stability
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Inflation rate (JP/-)
G
lobal pressures are still very high in 2022. The world economy still has to face several risk factors from now on due to global inflationary pressures, the continuing war between Russia and Ukraine, geopolitical tensions in several countries and aggressive worldwide monetary policy tightening.
Global inflationary pressures continue to increase in line with high commodity prices due to continued supply chain disruptions followed by widespread protectionist policies, particularly related to food policies. Various countries, notably the United States, have responded to rising inflation with more aggressive monetary policy tightening measures, thereby restraining the economic recovery and increasing the risk of stagflation.
US inflation has remained at a high level for the past few months, followed by a 225-basis-point hike in its benchmark interest rate so far this year, from January to July, heading to its upper limit of 2.5 percent.
Until the end of the year, the US Federal Reserve will also continue to raise the Fed Funds Rate to between 3.5 percent and 4.5 percent due to the view that inflation is still high, above the 2 percent target.
With the various risks remaining high, there is a growing possibility that the global economy will slow down this year. Economic growth in multiple countries, such as the US, European Union, Japan and China, is estimated to be lower than the previous projection.
The World Bank and IMF revised their forecasts for global growth in 2022 down to 2.9 percent (from 4.1 percent) and 3.2 percent (from 3.6 percent), respectively.
The increasing uncertainty in global financial markets has resulted in more significant foreign capital outflows, particularly portfolio investment, and resulted in the weakening of currencies of developing countries against the US dollar, including Indonesia’s.
