TABLE OF CONTENT
Synergy and Policy Innovation: Key to Resilience and Saving the
Economy from Crisis Risk 5
Global Economic Performance and Prospects: Deteriorating with High
Risk of Recession, High Inflation, and High Uncertainty 10
National Economic Performance and Prospects: Optimistic and Vigilance 18
Bank Indonesia Policy Mix in 2022: Maintaining Stability and Momentum
for National Economic Recovery 28
• Rupiah Exchange Rate Stabilization Policy 30
• Liquidity Normalization Policy 31
• Interest Rate Policy 32
• Accommodative Macroprudential Policy 33
• Acceleration of Payment System Digitalization 34
• Money Market Deepening 40
• Development of Sharia Economic and Finance, and MSMEs 43
• International Policy 47
• Bank Indonesia Transformation 49
National Economic Policy Mix Synergy and Innovation Moving Forward:
Strengthening Resilience, Fostering National Economic Revival 51
Bank Indonesia Policy Mix Direction in 2023: Maintaining Stability,
Accelerating Economic Recovery 59
• Monetary Policy Direction 60
• Macroprudential Policy Direction 63
• Payment System Policy Direction 67
• Money Market Deepening Policy 74
• Inclusive and Green Economic-Financial Policy 77
• International Policy 78
• Institutional Reform Policy 80
Moving Forward with Optimism and Vigilance: Strong, Recover, and
Revival Towards Advanced Indonesia 82
SYNERGY AND INNOVATION
STRENGTHENING RESILIENCE AND REVIVAL
TOWARDS ADVANCED INDONESIA
Speech of the Governor of Bank Indonesia
BANK INDONESIA ANNUAL MEETING
Jakarta, 30 November 2022
We are honored to welcome,
The President of the Republic of Indonesia, Joko Widodo,
With respect to,
Leaders and Members of DPR and DPD RI,
Leaders of State Institutions,
Ministers of the Advanced Indonesia Cabinet,
Chairman and Members of the OJK and LPS Board of Commissioners,
Our predecessors of Governors and fellow Members of the Board of Governors of Bank Indonesia,
Governors, Mayors and Regents of Regional Heads from all over Indonesia,
National Banking, Corporate and Media Leaders,
The recipients of the 2022 Bank Indonesia Awards,
Invitees.
Assalamu'alaikum Warahmatullahi Wabarakaatuh,
Greetings to everyone, Shalom,
Om Swastyastu, Namo Buddhaya,
Greetings of Virtue.
First of all, let us express our gratitude to the presence of Allah subhanahu wa ta'ala, God Almighty, for
His mercy and blessing we were able to gather at the 2022 Bank Indonesia Annual Meeting today. With
all humility, we would like to express our gratitude to His Excellency, the President of the Republic of
Indonesia, who is willing to attend along with all the invitees.
We congratulate banks, corporations, and individuals who received the 2022 Bank Indonesia Awards
totaling 58 (fifty eight) awards in 4 (four) areas and 18 (eighteen) categories in the field of managing
monetary and financial system stability, payment systems and the management of Rupiah, the
development of MSMEs and the Sharia financial economy, as well as supporting Bank Indonesia policies.
This award is held annually, in conjunction with the Bank Indonesia Annual Meeting, as an appreciation
and at the same time national recognition to partners who have supported the implementation of Bank
Indonesia's tasks.
At this auspicious opportunity, allow us to present an evaluation of economic performance in 2022 as
well as economic prospects and the direction of Bank Indonesia's policies in 2023 which we summarize
under the theme "Synergy and Innovation Strengthening Resilience and Economic Revival Towards
Advanced Indonesia". Our presentation is presented in six parts, namely: (i) The importance of synergy
and innovation as the key to resilience and saving the economy from crisis risk; (ii) The performance and
prospects of the global economy that is full of risks and uncertainties; (iii) Performance and prospects of
the national economy showing resilience and recovery; (iv) Bank Indonesia's 2022 policy mix to maintain
stability and promote economic growth; (v) Synergy and innovation in the national economic policy mix
to strengthen resilience and resurgence; and (vi) The direction of Bank Indonesia's policy mix in 2023.
This explanation also serves as the fulfillment of Bank Indonesia's accountability and transparency as
mandated in the Bank Indonesia Law.
Synergy and Policy Innovation: Key to a monetary crisis occurred at the beginning of the
Resilience and Saving the Economy from Covid-19 pandemic which spread rapidly throughout
Crisis Risk the world and caused fear and panic with the threat
of death and worsening economic conditions. Global
As a small country in an open economic system, financial market panic occured in early April 2020,
Indonesia is not immuned from the impact of global prompting investors to withdraw their portfolio
turmoil which often leads to higher risk of economic investments and convert them to more liquid assets
crisis. What happened in the last 5 (five) years serves denominated in US dollars, known as "cash is the
as a concrete example. In 2017 and 2018, there king" phenomenon. This mass global phenomenon
was a trade war between the United States (US) and led to the large amounts of foreign capital flight in
China which caused global financial market turmoil short periods of time from developing countries.
and decreased the volume of world trade. At the Indonesia was no exception and experienced a capital
same time, to reduce inflation to the 2% target, flight of around USD11 billion in just two weeks and
the US central bank, The Fed, raised its monetary caused the Rupiah to weaken to Rp16,575 per US
policy interest rate 4 (four) times during 2018 or 9 dollar in March 2020, before moving to appreaciate
(nine) times since the normalization of monetary and stabilize at around Rp14,000 per US dollar
policy began in December 2015, to 2.25%-2.50%, in December 2020. There was a real threat of a
an interest rate hike that President Donald Trump monetary crisis if Bank Indonesia did not persistently
opposed. The impact of the US-China trade war and intervene in the foreign exchange market and the
US monetary policy tightening through trade channel government bond (SBN) market in a large amount
led to the global economic slowdown. The slowdown to stabilize the Rupiah exchange rate and save the
was felt not only in these two largest economies in Indonesian economy.
the world, but also in other countries due to China's
central position in the global supply chain. Even The threat of a social crisis from the Covid-19
larger and immediate impact occured in financial pandemic occured due to the restrictions on mobility,
channel. The US-China trade war caused global raising unemployment and reducing people's income,
financial market panic, foreign capital flight and especially the lower income class. The policy to
pressure on exchange rate depreciation in developing restrict mobility must be taken to prevent more
countries, including Indonesia. The Rupiah exchange deaths due to the rapid spread of the Covid-19
rate depreciated to Rp15,000 per US dollar in pandemic, while waiting for vaccines to achieve herd
mid2018 before stabilizing at around Rp13,500 per US immunity. As a result, while people with fixed incomes
dollar at the end of 2018 after a large intervention and the upper middle income class were still able to
by Bank Indonesia. At the IMF and World Bank use their savings to make a living, people on lower
Annual Meeting in Bali in October 2018, President income class with non fix income were at risk of
Joko Widodo voiced out loud "The Winter is Coming", starvation as they could not work and had no savings.
referring to the famous television drama series The ability of the APBN to provide social assistance
"Game of Thrones", to stop the trade war between the was crucial to avoiding a social crises. We are grateful
two economic giants and seek solutions to save the that while many countries facing limited fiscal space,
world economy. the Government of Indonesia was able to increase the
budget for social assistance program with direct cash
Indonesia was also affected by the extraordinary assistance (BLT), health assistance, and funds for
impact of the Covid-19 pandemic that hit the preemployment cards.
world since February 2020, almost causing a
multidimensional crisis. There are at least 4 (four) The threat of an economic crisis almost occured
crisis threats from Covid-19, namely monetary, because the Covid-19 pandemic lasted for a very
social, economic, and humanitarian. The threat of long time, even its effects are still being felt today.
Restrictions on mobility which must be carried out In developed countries, the availability of vaccine
as part of the handling of the Covid-19 pandemic, supplies and large government fiscal spending
have also caused the halt of various economic and allowed a faster vaccination rates and therefore a
financial activities. Income declined had led to faster economic recovery. Meanwhile in EMDEs, as
significant reduction in the demand for goods and limited vaccine supply and fiscal spending capacity,
services. Likewise, business activities were limited or the vaccination rate was slower and so was the
even stopped, resulting in a decline in sales, liquidity, opening up of mobility and economic activity. As
profitability, and corporate capital. Debt-equity a result, there has been an imbalance in the global
leverage ratio has increased since the Covid-19 economic recovery from the impact of the Covid-19
pandemic, both in Advanced Economies (AEs) and pandemic, which is faster in AEs and slower in
in the Emerging Market and Developing Economies EMDEs.
(EMDEs). In fact, the number of corporate failures
soared to almost the same rate of the global financial We should be grateful that in the midst of the global
crisis, with the largest in the US, then Europe, and pressures, national economy shows strong resilience
EMDEs. The prolonged Covid-19 pandemic also and even with a commendable performance.
had a scarring effect on corporate conditions and Over the last 5 (five) years, Indonesia's economic
increased risks to financial system resilience and performance has been among the best in the world
stability. The scarring effect on corporations has a (Table 1). National economic growth reached more
negative impact on the high risk of credit default, than 5.0% before the Covid-19 pandemic and
large losses, decreased capital, and the risk of failure recorded an average of 3.38% in the 2017 - 2021
in individual banks and financial system stability. period. Even the economic contraction during the
Consequently, the relaxation on credit restructuring Covid-19 pandemic stood at 2.07%, among the
provisions has been implemented in many countries, smallest in the world. Macroeconomic stability has
including Indonesia, to postpone principal and also been maintained. The average inflation rate
installment payments, thereby providing concessions was relatively low at 2.60% and never exceeded
for the recognition of Non Performing Loan (NPL) in its target, thus supporting high economic growth.
banks. Moreover, the average depreciation of the Rupiah
exchange rate was recorded as low as 1.18% with
The Covid-19 pandemic which subsided at the end the highest depreciation of 5.97% in 2018 before an
of 2020, spread again with the delta variant that appreciation of 3.44% in 2019, thereby volatility was
quickly reached Indonesia in May-August 2021, also low. The current account deficit was maintained
threatening a health and humanitarian crisis. The below 3% of GDP and even very low during the
delta variant is highly contagious and more virulent in Covid-19 pandemic period and recorded a surplus
its impact on human health and mortality. The days of USD3.46 billion in 2021. Meanwhile, foreign
of May to August 2021 were full of heartbreaking exchange reserves was high, reached USD144.9
events with hundred of thousands of deaths, billion at the end of 2021, more than sufficient to
hospitals and cemeteries were full, unavailability pay for imports, government debt, and to support
of medicines and limited medical equipment. Even the stabilization of the Rupiah exchange rate. On
vaccines were still very limited in number and the other side, the fiscal deficit was maintained
the Government had to pay a premium to order below 3% of GDP, and even during the 2020 - 2022
them. The level of vaccination and the strictness Covid-19 pandemic period the fiscal deficit was
of restrictions on mobility determined the level among the lowest in the world. Likewise, financial
of spread of the Covid-19 delta variant, as well as system stability was maintained as indicated by
its impact on the risks to health, humanity, and among others a high capital adequacy ratio (CAR), a
economic. However, there was a large disparity in low NPL ratio, and increasing credit growth in line
the ability to vaccinate between AEs and EMDEs. with the recovery in economic activity and business
Table 1. Indonesia's Selected Economic Indicators (2017-2021)
2017 2018 2019 2020 2021
Economic Growth (%) 5.07 5.17 5.02 -2.07 3.69
Headline Inflation (%) 3.61 3.13 2.72 1.68 1.87
Current Account (USD billion) -16.20 -30.63 -30.28 -4.43 3.46
Foreign Exchange Reserves (USD billion) 130.20 120.65 129.18 135.90 144.91
Rupiah Exchange Rate (IDR/USD) 13,565 14,375 13,880 14,040 14,250
Monetary Policy Rate (%) 4.25 6.00 5.00 3.75 3.50
Source: BPS, Bank Indonesia
sectors. Indonesia also continues to record progress in the spirit of interdependence and simultaneity
in various economic reforms through infrastructure of policies in the framework of recognition and
development, downstreaming of natural resources, appreciation for the independence of their respective
and digitalization of economic-financial during the authorities.
Covid-19 pandemic.
The close synergy between the Government's
Synergy and innovation are the two keywords fiscal policy and Bank Indonesia's monetary policy
of Indonesia's economic resilience in the face of serves as a strong pillar of resilience and revival
global turmoil and for economic revival towards of the national economy from the impacts of
Advanced Indonesia. Synergy is the collaboration global turmoil. In the May-August 2018 period,
of two or more public policy authorities to optimize when Bank Indonesia had to save Indonesia from
their policy instruments for achieving common the threat of an exchange rate crisis through a
goals for the national economy, while respecting large-scale intervention in the foreign exchange
and upholding each other's independence. Synergy market and an increase in interest rates, fiscal
comes from the understanding by each authority on policy was also directed at controlling domestic
the need to achieve a common goal for the national demand by reducing the fiscal deficit to strengthen
economy, namely the balance between stability and macroeconomic stability while continuing to increase
growth. From the understanding of the intended the allocation of the capital expenditure budget for
targets, optimality of the policy mix according to infrastructure development to support economic
each authority can be formulated, both in terms growth. In fact, the Government continued to issue
of the complementarity of policy instruments and global bonds to prevent a drastic decline in foreign
the effectiveness of their transmission in achieving exchange reserves in order to support exchange
the targets. Thus, inter-authority policy synergy rate stabilization by Bank Indonesia. On the other
fulfills 3 (three) conditions of the "Pareto optimum", hand, at the beginning of the Covid-19 pandemic,
namely optimization of target, policy instruments, around April-June 2020 when there was an outflow
and effectiveness of transmission. Indeed, the of foreign investors from holding large amounts
threat of an economic crisis, such as when facing of goverment securities (SBN) which caused high
global turmoil and the Covid-19 pandemic, makes yields increases and pressure to weaken the Rupiah
it easier to achieve optimal policy synergy between exchange rate, Bank Indonesia strengthened its
authorities. In addition, the professionalism of intervention by selling foreign exchange reserves in
authority leaders and institutional arrangements spot, on a forward basis (Domestic Non-Deliverable
can strengthen the realization of the policy synergy, Forward, DNDF), and simultaneously buying SBN
sold by foreign investors from the secondary market. policy during the Covid-19 pandemic emergency
The foreign exchange market operation, called triple situation was carried out through 3 (three) types of
intervention (spot, DNDF, and buy SBN from the Joint Agreement mechanisms between the Finance
secondary market), was able to stabilize the Rupiah Minister and the Governor of Bank Indonesia. First,
exchange rate and increase SBN yields. At the same the purchase of SBN by Bank Indonesia from the
time, the liquidity contraction resulting from the sale primary market as a stand-by buyer with a yield
of foreign exchange was neutralized by expanding rate according to the market mechanism, when
liquidity from the purchase of SBN on the secondary not all of the SBN auction targets for Government
market, thereby avoiding tight liquidity in the money fiscal funding can be absorbed by the market. This
market and banking sector. As result, not only was mechanism is valid for a period of 3 (three) years
a monetary crisis prevented, but it also avoided 2020, 2021, and 2022. In this regards, as of 15
an increase in fiscal burden due to the rise in SBN November 2022, Bank Indonesia has purchased
yields, as well as risks of banking failure and financial SBN amounted of Rp266.11 trillion. Second, the
system stability. purchase of SBN by Bank Indonesia in the primary
market directly with a burden sharing mechanism
The fiscal-monetary policy synergy was to meet the increasing needs of the APBN for social
strengthened during the Covid-19 pandemic to protection programs (Rp397.6 trillion with a net
save Indonesia from the risk of a multidimensional burden of 0% for the Government) and national
crisis. Based on the Enactment of Government economic recovery (Rp117 trillion) with a net
Regulation in Lieu of Law (Perppu) No. 1 2020 charge of 1% below the Bank Indonesia Reverse
which was later ratified into Law No. 2 2020, the Repo interest rate for 3 (three) months for the
fiscal deficit is allowed to exceed 3% of GDP and Government, due to the worsening of the Covid-19
Bank Indonesia is also allowed to purchase SBN pandemic. This burden-sharing mechanism only
directly from the primary market for fiscal financing applied to the 2020 APBN financing. Third, the
(Figure 1). The close coordination of fiscal-monetary purchase of SBN by Bank Indonesia in the primary
Figure 1. Coordination of Fiscal Policy and Monetary Policy during the Covid-19 Pandemic
LAW NO. 2 of 2022
- Fiscal Deficit of more than 3% of GDP until 2022 (Article 2)
- APBN financing by Bank Indonesia through the purchase of Goverment Bonds (SBN) in the primary market (Article 16)
JOINT DECREE BETWEEN THE MINISTER OF FINANCE AND THE GOVERNOR OF BANK INDONESIA - MECHANISM FOR SBN
PURCHASES IN THE PRIMARY MARKET FOR APBN FINANCING
1. JOINT DECREE I (KB I) - APRIL 16, 2020
• Bank Indonesia participates in the SBN auction in the primary market according to market interest rates, as a noncompetitive
bidder (stage I of the auction), greenshoe option (stage II of the auction), or private placement (stage III of the auction).
• For general purpose spending in APBN. Valid for three years according to Law No. 2 of 2020.
• Total purchases of SBN by Bank Indonesia amounted to Rp75.9 trillion for the 2020 APBN, Rp143.3 trillion for the 2021 APBN,
and Rp46.9 trillion (as of 15 November 2022) for the 2022 APBN.
2. JOINT DECREE II (KB II) - JULY 7, 2020
• For social protection budget allocation and the national economic recovery program from the impact of the Covid-19 pandemic.
Only applies to the 2020 APBN.
• SBN purchases by Bank Indonesia in the primary market through private placement mechanism with a burden sharing mechanism.
• A total of Rp397.6 trillion for the public goods budget (social protection) with SBN coupons equal to Bank Indonesia's
three-month tenor reverse repo interest rate. All coupons are returned by Bank Indonesia to the Government so that the burden
on the Government is 0%.
• A total of Rp117 trillion for the nonpublic goods budget (subsidies for MSMEs and corporations) with SBN coupons equal to Bank
Indonesia's three-month tenor reverse repo interest rate. Part of the coupons were returned by Bank Indonesia to the
Government so that the burden was very low.
3. JOINT DECREE III (KB III) - AUGUST 23, 2021
• For the health and humanitarian budget allocation to overcome the impact of the Covid-19 pandemic.
• SBN purchases by Bank Indonesia of SBN by Bank Indonesia in the primary market through private placement mechanism
amounted Rp215 trillion for the 2021 APBN and Rp224 trillion for the 2022 APBN.
• Bank Indonesia three-month tenor reverse repo interest rate for the SBN coupon, much lower than market interest. Coupons for
SBN of Rp58 trillion in 2021 and Rp40 trillion in 2022 are returned by Bank Indonesia to the Government so that the burden on
the Government is 0%.
Source: Bank Indonesia
market directly with a coupon at the Reverse Repo ii. Second, monetary policy continue to rely on
Bank Indonesia interest rate for 3 (three) months the main policy instrument of the BI7DRR
to finance the enormous health and humanitarian interest rate. In this regard, we lowered the
funding needs in the 2021 APBN (Rp215 trillion) BI7DRR interest rate to the lowest level of
and the 2022 APBN (Rp224 trillion) due to the 3.50% in line with low inflation and the need to
outbreak of the Covid-19 delta variant. These health encourage economic growth after the impact
and humanitarian budget allocation needs include of the Covid-19 pandemic. However, we have
vaccination programs, hospital fees, medicines, strengthened our policy of intervention in
medical devices and medical personnel. Once again, the foreign exchange market in spot, DNDF,
the close synergy between fiscal policy and monetary and through buying/selling of SBN from the
policy has saved Indonesia from a multidimensional secondary market, or what we called triple
crisis, namely the health crisis, social crisis, exchange intervention, to maintain the stability of the
rate and monetary crisis, fiscal crisis, financial system Rupiah exchange rate from the impact of the
crisis, and economic crisis. global financial market turmoil. Moreover, we
also adopted a quantitative easing (QE) policy
The resilience of the Indonesian economy is also through a large amount of liquidity injection to
the result of policy innovations taken by the ensure the banking system is protected from a
Government and Bank Indonesia. The challenges financial system crisis and to contribute to the
we face, both because of the Covid-19 pandemic national economic recovery.
and the impact of global spillover, are complex
and multidimensional. Conceptual understanding iii. Third, we eased our macroprudential policy with
of theory and practice in dealing with crises is a number of instruments, such as lowering the
clearly needed. However, the global turmoil that down payment policy to 0%, or increasing the
continues to hit our economy also requires creativity, loan-to-value ratio (LTV) to 100% for property
innovation, speed, and courage in the formulation and automotive loans, reducing the obligation
and decision-making of policy mix responses from for Macroprudential Liquidity Buffers (MPLB),
each institution as well as policy synergies with other Macroprudential Intermediation Ratio (MIR),
institutions. That is our spirit and commitment at providing incentives to banks for lending to
Bank Indonesia to continue to innovate with a policy 38 priority sectors, including MSMEs, to spur
mix in maintaining monetary stability to support national economic recovery.
the national economic recovery from the Covid-19
pandemic and the impact of global spillover. iv. Fourth, accelerating the digitalization of the
payment system to strengthen the integration
i. First, we eased all instruments in the Bank of the national economic-financial digital
Indonesia policy mix in 2020 and 2021 to ecosystem through the use of QRIS (Quick
support economic growth after the impact Responses Code Indonesian Standard, the only
of the Covid-19 pandemic and avoid tight QR standard for payments), the implementation
liquidity that could lead to a domestic monetary of BI-FAST (a cheap, 24/7 real-time, retail
and financial system crisis. As the economy payment infrastructure), and one language in
begins to recover in 2022 and to protect the payment services of the National Standard
domestic economy from global ramifications, Open API Payments (SNAP). Regulatory
we changed the monetary policy direction to reform of the national payment industry (bank
maintain stability, while macroprudential policies, and nonbank) is pursued through facilitating
payment systems, financial market deepening, licensing according to its classification (systemic,
and economic inclusion continue to focus on critical, and general) as well as accelerating the
economic growth. integration, interconnection, and interoperability
of payment infrastructure and money markets. the form of declining business conditions, balance
Bank Indonesia in collaboration with the sheets, and increasing debts that will take a long
national payment industry have also accelerated time to heal. If not addressed timely and properly,
the electronification of the distribution of the deteriorating condition of corporations could
Government social assistance programs, various en masse spread to the banking system with large
modes of transportation, as well as regional amount of credit defaults that could undermine
government financial transactions. financial system stability. Coordinated policy
responses from KSSK members are needed to
v. Fifth, we continue to encourage address them from both demand and supply side.
economicfinancial inclusion, both through the MSME In this regard, Bank Indonesia's policy instruments
development program, as well as the sharia are directed at reducing BI7DRR to the lowest
economic and finance. The MSME development level, injecting large amounts of liquidity (QE),
program is pursued through 3 (three) pillars, stabilizing the exchange rate, as well as providing
namely corporatization (including institutional incentives for banks to channel into priority sectors
strengthening and partner expansion), for national economic recovery. The government
endto-end capacity building (including through provides fiscal incentives in the form of interest
strengthening entrepreneurship and market rate subsidies to MSMEs, corporate tax reductions,
expansion), and financing for expansion of to the placement of funds in a number of banks to
financial access (including digitalization of channel credit to priority sectors, especially MSMEs.
payments). The MSME development program is The Financial Services Authority (OJK) provides
focused on food clusters, especially to support relaxation of provisions in credit classification in the
controlling inflation, as well as handicraft banking credit restructuring program to the business
clusters for export promotion according sectors so that there is no mass credit default. The
to the beauty and diversity of Indonesian Deposit Insurance Agency (LPS) ensures that public
culture. The sharia economic chain ecosystem deposits are guaranteed in banks, thus supporting
development program is focused on halal food, the financial system stability, as well as as lowering
modest fashion, and Muslim-friendly tourism. the guaranteed interest rate to support national
Digitalization of payments with QRIS and BI- economic recovery.
FAST as well as financial literacy and consumer
protection programs are encouraged to expand
access for MSME financing and the sharia Global Economic Performance and
economic and finance. The MSME promotion Prospects: Deteriorating with High Risk
program is carried out through a national event of Recession, High Inflation, and High
called the "Karya Kreatif Indonesia (KKI)" which Uncertainty
held once a year, while for the sharia economic
and finance is carried out through the Sharia Synergy and innovation in the policy mix need
Economic-Financial Festival (FESyar) event which to be continuously improved to strengthen the
held in three regions (Sumatra, Java, and Eastern resilience of the national economy from the impact
Indonesia) and the Indonesia Sharia Economic of increasingly volatile global economic spillover in
Festival (ISEF) which is an international event. future. Geopolitical tensions are further exacerbating
the fragmentation of global economy prospects.
We also pursue synergy and policy innovation The continuation of the Russia-Ukraine war and the
in maintaining financial system stability in close imposition of sanctions on Russia have resulted in
coordination with the Financial System Stability limited supplies of energy and food prices which
Committee (KSSK). The Covid-19 pandemic has in turn led to a very significant increase in prices.
caused a scarring effect to the business sectors in Meanwhile, the continuing trade war between the
US and China and the restrictions on mobility due impact on global economic and financial spillover,
to Covid-19 in China have further exacerbated both from trade and financial channels, on EME
disruptions to global supply chains and Chinese countries including Indonesia.
tourist travel to various countries. The high level
of political and economic fragmentation as well as Continuing political and economic fragmentation
worsening disruptions in global supply chains have as well as aggressive monetary policy tightening
caused and will further weaken global economic in developed countries have led to a slowdown
growth from the supply side. At the same time, very in the world economy, accompanied by the
high energy and food prices have caused global increasing risk of recession. Global economic
inflation to soar and prompted central banks in growth was revised down to 3.0% in 2022 and
developed countries, especially the Fed and the further slower to 2.6% in 2023 with a downward
European Central Bank (ECB) as well as a number risk trend, before improving to 2.8% in 2024 (Table
of Emerging Market Economy (EME) countries such 2). All countries have experienced a slowdown
as Brazil, Chile, and Mexico to aggressively increase in growth, though to varying degrees. The sharp
policy rates. As a result, world economic growth downward correction mainly occurred in the US,
has slowed and is at risk of recession in line with Euro Area, and Latin America in 2023 which was
the decline in aggregate demand due to monetary accompanied by the increasing risk of recession.
tightening and the weakening purchasing power of This is because in the three regions the contraction
public consumption due to high inflation. Meanwhile in growth occurred simultaneously, both from the
on global financial markets, the very aggressive supply side due to limited energy supply caused
increase in policy rates by the Fed has driven the by the geopolitical tensions, and from the demand
US dollar exchange rate to be extremely strong and side due to aggressive monetary tightening and
put downward pressure on various world currencies, declining purchasing power of consumption due to
including the Rupiah. The negative risk perception high inflation. Meanwhile, growth correction was
in global financial markets has worsened, prompting relatively smaller in countries where monetary policy
global portfolio investors to withdraw and convert tightening was relatively non-aggressive and/or had
their funds to liquid instruments (the "cash is the better domestic energy and food supplies. Japan and
king" phenomenon), and further exacerbate the India, which in 2022 grew by 1.7% and 6.6%, will
Table 2. Global Economic Performance and Prospects (%)i
2020 2021 2022* 2023* 2024*
World -3.0 6.0 3.0 2.6 2.8
Advanced Economies -4.4 5.2 2.4 1.1 1.5
US -3.4 5.7 1.9 1.0 1.1
Euro Area -6.1 5.2 3.1 0.7 1.5
Japan -4.6 1.7 1.7 1.5 1.2
Emerging Economies
-1.9 6.6 3.5 3.6 3.8
China 2.2 8.1 3.2 4.5 4.6
India -6.6 8.3 6.6 6.0 6.2
ASEAN-5 -3.4 3.4 5.0 5.0 5.6
Latin America -7.0 6.9 3.0 1.3 1.3
decline to 1.5% and 6.0% in 2023, which are then peak at 10,0% in the third quarter of 2022 before
projected to grow by 1.2% and 6.2% respectively in declining to 5.2% in the fourth quarter of 2023.
2024. China's growth is expected to improve