Sri Mulyani Brings Bad News from G20, Special Message for AHY - CNBC Indonesia

Intan Rakhmayanti Dewi, CNBC Indonesia

Saturday, 09/03/2024 18:45 IWST

Photo: (Ist Kiki Maulana/Ministry of ATR/BPN)

Jakarta, CNBC Indonesia – There was bad news brought by the Minister of Finance Sri Mulyani after attending the Financial and Central Bank Governors’ Meeting (FCMBG) of G20 member countries in Brazil.

The bad news is about the condition of the world economy. This bad news was conveyed by Sri Mulyani at the 2024 National Working Meeting of the Ministry of Agrarian Affairs and Spatial Planning/National Land Agency which was also attended by Agus Harimurti Yudhoyono (AHY) and his staff.

“Because I just returned from the G20, a little souvenir for Mas AHY,” said Sri Mulyani when giving a presentation at the ATR/BPN National Working Meeting, quoted on Saturday (9/3/2024).

Sri Mulyani said that world economic conditions in 2024 are still predicted to be weak and not good. According to him, this condition was caused by the effects of the Covid-19 pandemic and geopolitical tensions due to war.

He said when the pandemic passes, a strong and sustainable global economic recovery is expected. However, what actually happened was a scaring effect which had a profound effect on the economy. As a result, recovery does not proceed in a balanced manner.

“When the world economy experienced a contraction, it was hoped that at that time there would be a strong and sustainable recovery, however, because there was a scaring effect or a deep effect on the economy, the recovery did not proceed in a balanced manner,” he said.

This former World Bank official said that economic conditions were made worse by political tensions due to the war. Food and energy prices, he said, rose significantly. This increase then drove high inflation in many developed countries.

The Minister of Finance gave the example of inflation in European countries, which is usually 0%, but is now actually rising. Likewise, Japan, which usually experiences low inflation and even deflation, now has to deal with high inflation.

“With the combination of rising food and energy prices and supply chain disruption, inflation is occurring in various developed countries,” he said.

He said that the increase in prices was responded to by increasing interest rates by the central banks of developed countries. The increase, he said, was not small, but up to 500 basis points and over a fairly long period. This condition, which is often called higher for longer, has an impact on developing countries like Indonesia.

According to him, interest rates are like vacuum cleaner which sucks foreign capital out of developing countries.

“Capital tends to flow out, because interest rates seem to suck capital away from developing and emerging countries, this is what causes developing countries to experience currency pressure and many have unhealthy fiscal conditions,” said Sri Mulyani.

He said that in today’s unfavorable world conditions, strong consolidation between ministries and domestic institutions is needed. According to him, the ATR/BPN Ministry led by AHY can take an important role because it is directly related to investment and the economy.

“I believe this is an important time for consolidation. I was asked to explain the economic conditions and how the APBN can support various policies in the agrarian and spatial planning fields which are one of the keys to investment, the economy and social justice.” he concluded.

Watch the video below: