What About the Economy of Indonesia Amid Persistently Turbulent International Conditions?

However, his outlook is not overly optimistic as he anticipates that global economic expansion will remain subdued in the second half of 2022 despite the pick-up in economic activity felt around the world due to the limited number of COVID-19 infections. So the low base facilitates the OECD’s reasonable growth forecast of 3 percent yoy (y/y) for the full year 2022. However, the OECD notes in its report that:

The world economy is paying a heavy price for Russia’s unprovoked, unjustified and illegal war of aggression against Ukraine. While the impact of the COVID-19 pandemic is still ongoing, the war is slowing growth and putting additional upward pressure on prices, especially food and energy. Global GDP stagnated in the second quarter of 2022 and output in the G20 economies contracted. High inflation is lasting longer than expected. In many economies, inflation in the first half of 2022 was at its highest level since the 1980s. With recent indicators deteriorating, the outlook for the global economy has clouded over.”

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Meanwhile, the OECD expects global growth to slow to a pace of 2.2 percent yoy (y/y) in 2023, as global gross domestic product (GDP) is estimated to lose $2.8 trillion as a direct result of the Russian invasion (compared to the December 2021 OECD Global Economic Outlook).

A key factor that will lead to a slowdown in global economic growth in the period ahead is monetary tightening, driven by rapidly accelerating inflationary pressures. Meanwhile, in the case of China, the strict COVID-19 lockdowns (related to China’s zero-COVID-19 policy) have also impacted both Chinese and global demand.

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The table above shows that selected countries (China being the notable exception) all show declining economic expansion in 2023 compared to the previous year. And considering that the Russo-Ukrainian war is unlikely to be resolved any time soon, the chances that this outlook will need to be changed are very slim. If governments respond to new COVID-19 outbreaks as they did in 2020, things can only get worse.

Meanwhile, the OECD says inflationary pressures are extending beyond food and energy almost everywhere as companies across the economy face higher energy, transportation and labor costs. Such broader inflationary pressures were already evident in the United States in early 2022, but are now also evident in the eurozone and to a lesser extent in Japan.

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