The impact on economic growth is outside of its (scope of) competence, that is not where the duty of BI (Bank Indonesia) or other central banks in the world lies, but in mitigating price stabilityJakarta (ANTARA) - The world will be concomitantly confronted with the rise in inflation rate and risk of recession in 2023, Chairman of the Financial Services Authority's (OJK's) Board of Commissioners Mahendra Siregar stated.
In handling these issues, the government either has to raise the interest rate to reduce inflation or reduce the interest rate to stimulate the economy, thereby preventing recession, he remarked.
The monetary authority cannot handle these challenges at the same time, given that its main duty is to only control the inflation rate and not to mitigate the economic decline, he explained during the Consumer Protection Dissemination and Education webinar, Monday.
"The impact on economic growth is outside of its (scope of) competence, that is not where the duty of BI (Bank Indonesia) or other central banks in the world lies, but in mitigating price stability," he elaborated.
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Despite this, if the price is rising high, and it is coupled with the declining economy, then the government has to intervene in handling this by encouraging growth, he noted.
"Next year, these challenges will happen simultaneously. High inflation, severe recession. If we want to raise the interest rate, then recession happens. If we do not raise the interest rate, then inflation continues to rise," Siregar noted.
Moreover, analysts estimated that the geopolitical conflict in 2023 will not be resolved within the next decade that will certainly affect the supply chain and logistics at the global level, he added.
However, analysts and multilateral institutions have also forecast that the economy of Indonesia and Southeast Asia will continue to grow positively at around five percent year-on-year (yoy) in 2023.
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"How can this happen? The answer is because we have a large domestic market and regional market. This domestic market should be optimized in terms of consumption, investment, and government spending," Siregar stressed.
On the occasion, he also said that Indonesia should stimulate new growth sources in regions as a foundation to handle global economic uncertainty in the years to come.
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Translator: M Heriyanto, Fadhli Ruhman
Editor: Fardah Assegaf
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