The World Bank predicts recession in 2023, how prepared is Indonesia?

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Illustration. (IO/Muhammad Hidayat)

Jakarta, IO – Recently the World Bank delivered “bad news”: the world is moving towards a recession in 2023, sparked by aggressive increase in global interest rates to tame inflation.

“The world’s three largest economies – the United States, China, and the European Union – have slowed dramatically,” it wrote in a new study as reported by CNBC Indonesia, Friday (16/9).

It also believes that even a moderate blow will trigger a global recession. And while interest rate hikes will continue until next year, this measure will not be sufficient to bring inflation back to pre-Covid-19 levels.

To curb inflation, the international lender said central banks may need to raise interest rates by an additional 2 percentage points on top of the 2-point increase average in 2021. It warned that this can slow global GDP growth in 2023, which is expected to shrink to 0.5 percent after contracting 0.4 percent.

According to the World Bank, this would meet the technical definition of a global recession. So, in the face of a recession storms, what should Indonesia be prepared for?