Indonesia’s chief of finance warns on economy

Finance Minister Sri Mulyani has raised concerns about the increasing risks faced by the global economy due to a shift in the geopolitical environment. Speaking at a forum organized by the Indonesian Bankers Association, Mulyani stated that experts have identified a return to a Cold War-like situation, where the Western bloc will be in opposition to Russia and China.

This shift in the geopolitical climate will have a negative impact on global economic growth and hinder its potential, she said. Mulyani urged policymakers and executives to learn from historical events in order to navigate the current challenges and avoid confusion and shock. She also highlighted the new challenges arising from shifting supply chains due to the new geopolitical “wall” that has emerged.

For the year 2023, Mulyani advised banks to exercise caution rather than optimism, given the downgraded global economic growth forecast of 2.7 percent, the expectation that a third of the world economy will fall into recession, and the possibility of debt crises in over 63 countries. Furthermore, she highlighted that climate change has become a mainstream issue that will require financial institutions to re-evaluate their policies and consider the risks posed by climate change to financial markets, in addition to achieving sustainable development goals.

The minister also highlighted that within the Group of 20, organizations such as the Bank of International Settlement and the Organization for Economic Cooperation and Development are discussing ways to mainstream the consideration of climate risk factors in the financial sector’s decision-making process. She urged all stakeholders to be proactive in their approach and to be prepared to adapt to the changing global economic and geopolitical landscape.