Inflation in developing nations becomes serious problem: BI Governor

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Rising inflation became a serious problem, especially in developing nations and countries with a developing market, Bank Indonesia (BI) Governor Perry Warjiyo stated during the virtual G20 Side Event High-Level Discussion on Friday.

“Several developing nations are only looking to recover with limited fiscal, while several others have debt problems,” he elaborated.

Apart from developing nations, inflation also became a problem in advanced nations.

The current rising inflation in various parts of the world arose due to the conflict between Russia and Ukraine that still continues.

Geopolitical tensions between the two nations causes a surge in commodity prices, especially energy and food prices that directly affect the entire nation.

In addition to inflation, Warjiyo noted that the impact of the conflict between the two nations is the trade route.

“War certainly causes issues in the global supply chain and hinders global economic growth,” he explained.

With the conflict between the two nations, the International Monetary Fund (IMF) revised the global economic projection, from 4.4 percent to 3.6 percent this year, he noted.

Beyond the trade route, the conflict between Russia and Ukraine also affects the financial channel wherein several world center banks feel that they have to raise the interest rate to handle inflation and restrict global liquidity.

During the event, BI Senior Deputy Governor Destry Damayanti stressed that the benchmark interest rate will become the last policy applied within the scope of BI’s monetary normalization.

“If inflation continues to rise, then BI will intervene and utilize the benchmark interest rate as the last policy,” she stated.

This year’s monetary policy will start to be directed toward maintaining stability, be it for price stability and rupiah exchange rate.

Meanwhile, BI’s other policies will still continue to encourage economic growth.

Source: Antara News