Sri Mulyani on the threat of recession: the state budget will remain as a shock absorber

TEMPO.CO, JakartaFinance Minister Sri Mulyani Indrawati pointed out that the threat of a recession looming over the global economy in 2023 could arise due to various factors, ranging from climate change to rising geopolitical tensions.

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

“The shock is enormous, that is, if the state budget cannot support [the shock], the state budget will collapse. If the state budget collapses, the economy will also collapse,” Sri said in Jakarta on Friday, October 18, 2022.

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

She also hopes that the state budget will always have the power against global turmoil so that national economic resilience is maintained. The former World Bank director also said fiscal management must be maintained. Otherwise, its existence will not only harm the economy, but also trigger a global crisis.

This condition occurs in the UK and Sri Lanka. Inflation in the UK hit a 40-year high, while Sri Lanka went bankrupt and its gross domestic product was minus 8.4%.

Sri Mulyani further said that the challenges that still need to be watched over the next year are climate change and ongoing geopolitical tensions, which could lead to global supply disruptions up to high inflation. Soaring global inflation then prompted the central banks of many countries to tighten their monetary policy by aggressively raising interest rates.


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