Jakarta – Bank Indonesia (BI) cut its projection of global economic growth in 2025 to 2.9 percent, from 3.2 percent previously.
BI Governor Perry Warjiyo stated that global economic uncertainty is increasing, triggered by the reciprocal tariff policy of the United States (US).
Retaliation measures by China, as well as potential responses from a number of other countries, are considered to exacerbate the fragmentation of the global economy and suppress the volume of world trade.
“As a result, world economic growth in 2025 is predicted to decline from 3.2 percent to 2.9 percent with the largest decline occurring in the US and China in line with the impact of the two countries’ tariff wars,” Perry said in the RDG Press Conference, Wednesday, April 23, 2025.
Perry also mentioned that economic growth in developed and developing countries is expected to slow down. This is due to the direct impact of declining exports to the US, as well as the indirect impact of declining trade volumes with other countries.
“The tariff war and its negative impact on the decline in US growth, China, and the world economy triggered an increase in global financial market uncertainty and encouraged risk aversion behavior of capital owners,” he explained.
apital Flows to Safe Haven, Emerging Market Currencies Under Pressure
In addition, US Treasury yields declined and the US dollar currency index (DXY) against various world currencies weakened amid expectations of a Fed Funds Rate (FFR) cut.
Global capital flows also began to shift from the US to countries and assets that are considered safer (safe haven), especially to financial instruments in Europe and Japan as well as gold commodities. On the other hand, capital outflows from emerging economies continued, putting pressure on their currencies.
“The worsening global conditions require strengthening policy responses and coordination to maintain external resilience, control stability, and promote economic growth in the country,” he said. (*)
