World Bank Cuts Indonesia’s Economic Growth Projection

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Indonesia’s economic growth projection in 2022 is corrected by the World Bank. The previous growth projection of 5.2% has now been corrected to 5.1. Then, what is the reason?

In a recent report, the World Bank estimates that growth in most emerging markets and emerging economies is expected to slow sharply this year.

This was mainly due to the impact of the continuing Russia vs Ukraine war. Across developing countries, the World Bank said the impact of the Russia-Ukraine war was amplifying global supply chain bottlenecks that have persisted since the Covid-19 pandemic.

This poses the risk of a spike in inflation at the global level, especially in developed countries, thereby prompting a faster-than-expected tightening of monetary policy.

Rising war-induced inflation has also occurred in developing countries and has put additional pressure on commodity prices and supply chains.

“Higher prices have eroded real incomes and reduced private consumption,” the World Bank wrote in its report, quoted Thursday (9/6/2022).

Investment is also expected to weaken in many developing countries, particularly in developing countries that face tighter financial conditions amid increasing policy uncertainty and weak growth prospects.

External demand also weakened in line with slowing global growth, especially for countries that rely on Russia and Ukraine as export destinations.

The Russia vs Ukraine war which hampers the prospects for economic growth in developing countries due to rising inflation, trade disruptions, and policy uncertainty is believed to increase the risk of a slowdown in economic growth.

Furthermore, the World Bank estimates that global economic growth will fall in free fall in 2022. The World Bank also warns of the impact of stagflation on the world economy.

In the latest Global Economic Prospects report, the World Bank said global economic growth had weakened and was exposed to protracted inflation due to the Russia vs Ukraine war.

In the report, they estimates that global economic growth is expected to free fall from 5.7 percent in 2021 to 2.9 percent in 2022.