Jakarta (ANTARA) - The banking crisis in Europe and the United States should remain a cause for concern—as a medium- to long-term challenge—for the global economy, Finance Minister Sri Mulyani Indrawati said on Monday.

This was one of the conclusions of the 2023 Spring Meetings of the IMF-World Bank in Washington. The meetings discussed whether Europe’s and the US' banking crisis is under control or should still be monitored.

"High inflation, high-interest rate, and liquidity tightening affect the financial sector, especially banking," she said during a press conference on the April 2023 edition of APBN KiTa, which was followed online on Monday.

She said that the world is still experiencing high inflation, both Consumer Price Index (CPI) and core inflation, which is being responded to with an increase in monetary policy interest rates, which will remain high until inflation comes under control.

This policy, in addition to liquidity tightening to control the demand side of the economy, will weaken economic growth in countries that have issued such a policy.

The combination of high inflation and interest rates is also expected to cause the economies of developed countries, such as the US and European countries, to slow down significantly in 2023.

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This could affect developing countries and developing markets, which rely heavily on export.

In addition, China's policy to reopen the economy has not yet helped recover the country's economy significantly yet, she informed.

"This condition means that the world's economic source is still very weak this year, which will affect the volume and export-import transaction between countries, which will certainly decline," she said.

To this end, the global economic growth projection from various international institutions in 2023 is still quite low, around 2.8 percent, from the realization in 2022 with 3.4 percent or 6.3 percent in 2021.

Meanwhile, inflation is estimated to still remain high for developing countries and reach 8.6 percent this year, while the figure is expected to touch 4.7 percent for developed countries and 7 percent for the whole world.

"This means that inflation will still be quite high for a long period of time or higher for longer," the minister said.

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Translator: Agatha O V, Fadhli Ruhman
Editor: Jafar M Sidik
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