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The Governor Of Bank Indonesia: The Outlook For The Global Economy Is Expected To Diminish By 2025

The Governor of Bank Indonesia, Perry Warjiyo, has indicated that the global economic outlook is expected to deteriorate in 2025 and 2026 due to a series of geopolitical issues worldwide. The potential re-election of Donald Trump as President of the United States could trigger significant changes in the geopolitical landscape and the global economy in a short timeframe. With a domestic market-focused approach, Trump is anticipated to reinstate higher import tariffs, which may lead to trade wars with other nations.

"High tariffs and even trade wars, geopolitical tensions, supply chain disruptions, and economic and financial fragmentation will result in a bleak global economic outlook for 2025 and 2026," stated Perry during the 2024 Annual Meeting of Bank Indonesia in Jakarta on Friday, November 29, 2024.

Global uncertainty is projected to rise, characterized by a slowdown in global economic growth, particularly in China and European countries. Furthermore, Perry noted that the rate of decline in global inflation is expected to slow down and may even rise again due to the risks associated with trade wars. This inflation risk is likely to impede the pace of reduction in the benchmark interest rate set by the Federal Reserve, keeping the Fed Fund Rate (FFT) elevated.

"Meanwhile, US Treasury yields are expected to rise significantly to 4.7 percent in 2025 and 5 percent in 2026, driven by increasing fiscal deficits and government debt in the United States," Perry remarked. The high benchmark interest rates set by the Federal Reserve and the yields on US government bonds are creating additional challenges, including a continued strengthening of the US dollar.

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