Indonesian economy resilient amid global shocks – Mon, January 23 2023

There are rumors from the developed countries that a breeze of recession is coming. The inflation virus has infected the world, and shockingly, forced central banks all over the world to push the interest rate up. As a result, the world economy shrunk during the last months of 2022.

In the past year, global headline inflation has surged from 4.7 to 8.8 percent year-on-year (yoy), reaching the highest level since the late 2008 financial crisis. Energy prices were the main driver with skyrocketing oil and gas prices. Other drivers, such as supply-chain disruptions, clogged ports and food-supply shortages, which mainly are the collateral damages from the Russian-Ukraine war, have also contributed particularly in Europe and other emerging countries. There are signs that inflation appears to be abating in December, but it is unwise to expect a quick normalization in 2023, at least not in the early quarters.

The inflation virus has spread and forced central banks around the globe to tighten the monetary policy. Interest rates are higher across most of the richer countries than they have been for more than two decades. The fierce tightening of monetary policy was the trigger for much of the turbulence that rocked the financial industry in 2022.