Minister of Finance: Economy in 2023 Dark and Many Countries Will Experience Recession

Dream - Minister of Finance Sri Mulyani warned that the global economy will be dark in 2023. Although there will be improvements in the middle of the year, the Minister of Finance stated that many countries will enter a recession.

This prediction refers to the projection of the International Monetary Fund (IMF) which estimates that global economic growth in 2023 will only reach 2.1 percent. This projection is a drastic decrease compared to the world economic growth in 2022 which could grow by 6.3 percent.

"The current global economic conditions in the world will be dark in 2023 because world economic growth is only 2.1 percent. This is a drastic decrease from the previous year's growth of 6.3 percent. So it is estimated that many countries will experience a recession," he said during the Handover of Fiscal Incentives for Inflation Control Performance in the Region, Monday, July 31, 2023.

Although warning about the IMF's projection, the Minister of Finance revealed that the global economic conditions are actually better than initially estimated.

"Now the situation is already in the middle of the year and it turns out that the conditions are slightly better than initially estimated," he said.

In addition to the sharply declining economic growth projection, this state treasurer also explained that global trade volume reached its lowest level with an achievement of 2.0 percent. This condition is in contrast to 2021 which reached 10.7 percent.

The decline in trade volume has an impact on limited stocks of goods and services, which will eventually push prices up and cause inflation.

"This is why the disruptions that occur, both from the supply side and from the trade and distribution side, will greatly determine inflation," he continued.

Furthermore, this former World Bank Director also mentioned that 2022 became a year with the highest inflation rate, reaching 8.7 percent, compared to initially only 0 percent or close to zero.

"Even developed countries and several countries experienced deflation and then jumped to 7.3 percent, relatively high. So it decreased, and if demand decreases, production activities will start to decline," he said.

Meanwhile, according to the Manufacturing Purchasing Managers Index (PMI) as of June 2023, the majority of countries experienced contraction reaching 61.9 percent.

The data presented by Sri Mulyani this time is among the G20 and ASEAN-6 countries (excluding Saudi Arabia, Argentina, Canada, and Australia).

In the data, major countries even entered the contraction category including the United States (US), Europe, Germany, France, England, Japan, South Korea, Malaysia, Vietnam, Italy, Brazil, South Africa, Singapore.

Meanwhile, the countries that remained in the expansion and acceleration zone reached 14.3 percent. The good news is that Indonesia is included in this zone along with Turkey and Mexico.

"Only 14.3 percent of countries experienced expansion and acceleration, including Indonesia along with Turkey and Mexico," she explained.

Meanwhile, the countries experiencing a slowdown in expansion reached 23.8 percent, including China, the Philippines, Thailand, India, and Russia.

"This illustrates that the global impact of economic slowdown due to inflation eroding purchasing power is very significant," she added.