Duke of Cambridge Prince William with David Attenborough at World Economic Forum - Photo by WEF

JAKARTA (TheInsiderStories) – The 2019′ World Economic Forum (WEF) raised the theme of Globalization 4.0 by discussing more about financial risk mitigation, a strategy to build market optimism in the midst of a weakening global economy, geopolitical tensions, and crises in environmental conditions and climate change.

Reported, the prospect of global economic growth expected to slow down by 3.5 percent in 2019 and 3.6 percent in 2020. Specifically, estimated that growth in developed economies will experience a slowdown from 2.3 percent in 2018 to 2 percent in 2019 and 1.7 percent in 2020.

For emerging markets and developing economies, economic growth is expected to weaken to 4.5 percent in 2019 from 4.6 percent last year. However, the increase will occur in 2020, with a projected growth of 4.9 percent.

International Monetary Fund (IMF) Managing Director Christine Lagarde believes there is no threat of a global crisis. According to her, the world economy grew more slowly than expectations and increased the risk.

The trimming of the projection is mainly in line with economic developments in Europe, including Germany, which was hit by a new standard of fuel emissions for automobiles and Italy which were under market pressure related to Rome’ budget.

Meanwhile, a slowdown in China’ economic growth that exceeds expectations and the possibility of a no deal Brexit is a risk factor for IMF projections. This means that the global is still overshadowed by the weakening of further prospects.

The slowdown in China’ economic growth was recorded to continue. The latest data, the “Bamboo Curtain” country economy grew 6.6 percent last year, the lowest in 28 years. This is in line with weak investment, dimming consumer confidence, and the pressure of trade wars with the United States (US).

However, the Chinese government is believed by many to take fiscal and monetary policies needed to spur the economy.

So what about the outlook for the Indonesian economy? Economists say a further slowdown in China’ economic growth will have an impact on the Indonesian economy.

But Indonesia is believed to still be able to grow in the range of five percent this year, supports by domestic consumption and government spending. It said, there are at least four impacts that need to be monitored regarding developments in China, namely weakening commodity demand from the country and slowing down the recovery of commodity prices.

Then, the possibility of outflows of foreign funds from the financial market to assets that are considered safe and slowdown in foreign direct investment. Even so, we optimistic that economic growth can still range from 5-5.1 percent with support from domestic consumption and government spending.

Thus, the slowdown in China’ economic growth has two dimensions, negative and positive. The negative dimension is the influence of export performance. But the government has also anticipated by issuing a policy on the foreign export retention products from the activities of exploiting, managing or processing natural resources in the country.

Meanwhile, the positive dimension, this slowdown will invite a response from the Chinese government in the form of more loose fiscal and monetary policies.

These policy responses along with loose policies in the US and Europe, will have a positive impact on pushing capital flows into the financial markets of developing countries including Indonesia. So the pressure of the rupiah exchange rate will be relatively reduced.

It is estimated that the economic growth target of 5.3 percent this year will only be achieved if the government can spur consumption and investment. The innovative policy in question is not only related to taxation. But a review of monetary policy is needed. So  Bank Indonesia policies not be too contractive amid the current slowdown.

Written by Lexy Nantu, Email: theinsiderstories@gmail.com

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