Global Economic Outlook Remains Dim
The global economic outlook is expected to remain "dim" in 2026 and 2027, according to Bank Indonesia (BI) Governor Perry Warjiyo. This is due to the high level of uncertainty driven by the United States’ protectionist policies. Warjiyo noted that these policies have brought about significant changes to the global economic landscape, with ongoing political tensions and an unclear end in sight.
Characteristics of the Dimming Global Economic Outlook
The dimming global economic outlook is characterized by five key factors.
First Characteristic: US Tariff Policy
The first factor is the continuation of the United States’ tariff policy, which has resulted in a decline in world trade, a decline in multilateralism, and the rise of bilateralism and regionalism.
Second Characteristic: Slowing Global Economic Growth
The second factor is the slowing of global economic growth, particularly in the United States and China. In contrast, the European Union, India, and Indonesia are considered to be performing relatively well. However, the slower decline in inflation is complicating central bank monetary policy.
Third Characteristic: High Government Debt and Interest Rates
The third factor is the high government debt and interest rates in developed countries, caused by excessively large fiscal deficits. This has resulted in high interest rates and fiscal burdens in developing countries.
Fourth Characteristic: Vulnerability of the Global Financial System
The fourth factor is the high vulnerability and risk of the global financial system due to multiple derivative product transactions, especially hedge funds with trading machines. This has an impact on capital flight and exchange rate pressures in emerging markets.
Fifth Characteristic: Rise of Cryptocurrencies and Stablecoins
The fifth factor is the rise of cryptocurrencies and stablecoins from the private sector. Warjiyo stated that there is a lack of clear regulation and oversight regarding this, necessitating the presence of a central bank digital currency (CBDC).
Impact on Indonesia
The global turmoil has had a negative impact on various countries, including Indonesia. Warjiyo emphasized the need for an appropriate policy response to maintain stability, encourage higher growth and resilience, and promote independence.
Conclusion
In conclusion, the global economic outlook remains uncertain and dim due to various factors, including the United States’ protectionist policies, slowing global economic growth, high government debt and interest rates, vulnerability of the global financial system, and the rise of cryptocurrencies and stablecoins. It is essential for countries, including Indonesia, to be vigilant and implement appropriate policies to mitigate the negative impacts of these factors and promote economic stability and growth.
