Apart from the Fed, the European Central Bank (ECB) also raised interest rates by 50 basis points to 2%. In addition, the ECB announced that it will reduce its balance sheet by EUR 15 billion per month from March next year until the end of the second quarter of 2023. The reduced balance means that the ECB will absorb more liquidity. The goal is the same as other central banks, to reduce inflation.
But on the other hand, it must be paid with an economic contraction. This means that the ECB, like other central banks, will continue to raise interest rates next year. According to a recent survey of economists by Reuters, Europe is most likely to enter into a recession in the first quarter of 2023. The first quarter of 2023 is only days away, meaning it is not long before the Blue Continent will enter a recession if predictions are correct.
The 2023 recession is in sight, is Indonesia ready?
The Central Statistics Agency (BPS), economic growth in Indonesia throughout 2022 continues to increase amid the shadow of a recession. In the third quarter of 2022, the wheels of the economy grew 5.72% per year (yoy). Meanwhile, Bank Indonesia (BI) projects growth above 5.5%. In the third quarter, it was 1.81% higher, and cumulatively or from January to September 2022, the Indonesian economy grew by 5.4% year on year. The achievements of the last four quarters prove Indonesia's relatively strong position amidst global economic conditions. As we know, inflation, recession, and energy crisis have hit many countries. This is of course an achievement for all Indonesian people in uncertain global conditions, the trend is even getting stronger.
With growth figures as recorded by BPS, it shows that Indonesia's economy can be said to be very resilient. This figure can be a strong capital for the Indonesian economy to face the threat of a world recession which is expected to start in 2023.
The data revealed by BPS is also convincing. On a year-on-year (yoy) basis, BPS noted that growth in the third quarter of 2022 absorbed 4.25 million workers. In August 2022, there were a total of 135.3 million workers, including 92.63 million full-time workers, or an increase of 8.37 million people, part-time workers of 34.13 million people, or a decrease of 1.24 million people, and underemployment of 8.54 million people or decreased by 2.88 million people. Data results from the National Labor Force (SAKERNAS) conducted in August 2022.
The thing to prove Indonesia is safe from recession is.
- Consumer Confidence
Consumption is the backbone of the Indonesian economy. This is unavoidable because public consumption accounts for more than 50% of the Gross Domestic Product (GDP).
The condition of this economic backbone can be seen from the people's purchasing power. The Consumer Confidence Index (IKK) reached 117.2 in September 2022, or remains at an optimistic level, although lower than the previous month's 124.7.
In September 2022, consumer confidence was observed in all expenditure categories, which was not as high as the previous month, especially respondents spending Rp. 4.1-5 million. At the same time, consumers remain optimistic about current economic conditions, although not as strong as the previous month, when the Current Economic Index (IKE) edged down from 111.7 to 108.3 in August 2022.
- Inflation
Indonesia's inflation rate in October 2022 is indeed 5.71%. Even though inflation was lower than in the previous period at 5.95%, inflation was temporarily outside normal conditions.
