Recession Threatens the World Next Year


The World Bank has just expressed its concerns regarding the global economy. They are skeptical that the United States and the world economy can avoid the recession threat next year. Domestically, the Rupiah has continued to decline in the last 4 weeks.

World Bank Chief Economist Carmen Reinhart expressed his pessimism given the spike in inflation, rising benchmark interest rates, and the economic slowdown in China.

“I was quite skeptical. In the mid-1990s, under Fed Governor Alan Greenspan, the US was able to make a soft landing for the US economy. But inflation was 3 percent, not 8.5 percent,” he told Reuters. Wednesday (29/6).

Historically, making a soft landing for an economy when inflation is soaring has been difficult. “What worries everyone is that all the risks pile up on the negative side,” he explained.

The global financial crisis of 2008-2009 largely affected a dozen developed countries. China at that time was a huge growth engine. The problem is, that the current crisis is much broader and China’s growth is no longer in the double digits.

The World Bank this month cut its global growth forecast by almost a third to 2.9 percent for the year. The Russian war in Ukraine also added to the chaos. Not to mention, the COVID-19 pandemic.

Global economic growth, he continued, could decline to 2.1 percent in 2022 and 1.5 percent in 2023. As a result, per capita growth is close to zero, if the risks of negative growth are realized.

Furthermore, national economic news in Indonesia is also still volatile. According to Refinitiv data, the rupiah opened trading at Rp. 14,915/US$, strengthening 0.14% in the spot market. At 9:07 WIB, the rupiah weakened slightly by 0.03% at Rp 14,940/US$.

The movement of the rupiah in the non-deliverable forward (NDF) market also shows that the rupiah is still difficult to strengthen. His position this morning is not too far away than it was moments after Friday’s close of trading.

In 4 weeks the total depreciation of the rupiah was 3.5%, so there were technical factors that made the rupiah strengthen in early trading today. However, the overall sentiment of market participants will still be affected by the recession issue, not only in the United States but also globally.

However, on Monday (4/6/2022), there was some good news from the United States (US) that could make Indonesia’s financial market. However, the issue of a world recession is also still affecting the sentiment of market participants. Analysts provide investment divestment advice seeing the world heading into a recession. The factors that affect today’s market movements will be discussed on pages 3 and 4.

According to Refinitiv data, the JCI last week fell by 3.5% to 6,794,328 which was the lowest position since May 19. In 4 trading days, the JCI has also never strengthened, with foreign investors recording net selling of around Rp. 3.9 trillion in the regular, negotiable, and cash markets.

With this capital outflow, so far this year, foreign net buys in the Indonesian stock market have been reduced to Rp 6.1 trillion.

Meanwhile, during the week, the rupiah weakened 0.61% to Rp. 14,935/US$, even touching Rp. 14,970/US$, which was the weakest level in more than 2 years.

In addition, the rupiah also recorded a 4-week decline in a row with a total of around 3.5%.