Sri Mulyani on Threat of Recession: State Budget Will Remain as Shock Absorber

TEMPO.CO, Jakarta - Finance Minister Sri Mulyani Indrawati highlighted that the threat of a recession lurking in the global economy in 2023 could occur due to various factors, ranging from climate change to rising geopolitical tensions.

The state treasurer emphasized that the state budget will continue to be an instrument to maintain economic stabilization. However, if the threats are not anticipated, the state budget may fail.

"The shock is tremendous, which is then if the state budget can't stand [the shock], the state budget will collapse. If the state budget collapses, the economy will also collapse," said Sri in Jakarta on Friday, October 18, 2022.

The state budget, Sri added, will continue to play a role as a shock absorber, an instrument to withstand the pressure of the crisis, just as during the lingering COVID-19 pandemic.

She also hoped that the state budget will still have the power against global turmoil so that domestic economic resilience is maintained. The former director of the World Bank also said that budget management needs to be maintained. Otherwise, its existence will not only harm the economy but also trigger a global crisis.

This condition happens in the United Kingdom and Sri Lanka. The UK inflation hits a 40-year high, while Sri Lanka went bankrupt and its gross domestic product was minus 8.4 percent.

Sri Mulyani further said challenges that still need to be watched out for in the next year are climate change and ongoing geopolitical tensions, which may cause global supply disruptions up to high inflation. The spike in global inflation then triggers central banks in many countries to tighten monetary policy by aggressively raising interest rates.

BISNIS.COM | ARRIJAL RACHMAN

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