Indonesian president Widodo to order stress test for economy amid global uncertainty

REUTERS

JAKARTA — Indonesian President Joko Widodo said he will order his administration to run a stress test to determine whether Southeast Asia’s largest economy could withstand significant economic shocks amid fears of a global recession.

The comments came after the International Monetary Fund cut its global growth forecast for 2023 amid colliding pressures from the war in Ukraine, high energy and food prices, inflation and sharply higher interest rates, warning that conditions could worsen significantly next year.

The president made the remarks at the opening of a cabinet meeting held earlier this week, according to a video uploaded to his official YouTube account on Wednesday.

“The global economic situation, geopolitics have been very troubling,” Jokowi, as the president is popularly known, said, emphasizing that there was a high degree of uncertainty and market volatility.

“I will ask to speak to several ministers regarding a stress test to see how far our strength lasts when the storm comes, regarding our currency, inflation, growth, and matters related to food and energy,” he said, adding that he requested that impacts on poverty also be examined.

Jokowi ordered his cabinet to devise plans for different scenarios to anticipate a worsening global economic outlook.

Indonesia’s financial markets have been under pressure in recent weeks amid fears of a global recession, with the rupiah IDR= hitting a fresh low since April, 2020 during intra-day trading on Wednesday.

However, the currency as well as the domestic stock market have been performing better than their Asian peers so far this year, which analysts said was due to Indonesia’s strong commodity exports.

Indonesia’s economic growth picked up to 5.44% in the second quarter due to the export boom and the easing of COVID-19 restrictions. Officials have said they expect growth to accelerate further in the third quarter. — Reuters