Climate change risks are the central in global financial planning

Jakarta – Climate change, which is expected to become a serious threat to the global economy in 2023, has become a mainstream topic in the world, including in financial markets, according to Minister of Finance Sri Mulyani earlier this month. She said climate change is one of the main topics in the G20 including sustainable finance, and many countries include climate change risks in every budget planning decision in the financial sector, including banking.

Sri Mulyani, in front of financial sector actors at the CEO Banking Forum in Jakarta, reminded them to be aware of this threat. She said, besides climate change, Indonesia also needs to be aware of various potential risks such as recession, debt and geopolitics. The potential for a recession this year was reflected by the International Monetary Fund (IMF), which estimates that the global economy will only grow 2.7 percent in 2023.

The IMF’s forecast for the 2023 global economy is lower than its estimate for 2022 economic growth of 3.2 percent, even the realization of 6 percent growth in 2021. Through this estimate, the IMF also predicts that 30 percent to 40 percent of the world’s economies will experience a recession this year.

In addition to the threat of a recession, the world is also faced with unsustainable state debt in 2023. There are more than 63 countries in the world whose debts are in a condition close to or even unsustainable, so this has become one of the main topics in Indonesia’s G20 Presidency.

“In 2023 the world must ride the inflation wave by raising interest rates when the debt stock is high, it will certainly have an impact not only in a recession, but in various countries with very high debts that have the potential to experience a debt crisis,” explained Sri Mulyani.

She said the debts of countries around South Asia most are currently under stress, including Bangladesh, Sri Lanka and Pakistan that have become IMF patients. Furthermore, the fundamental shift in geopolitics has also exacerbated the world which is currently faced with conditions of economic and financial risk because it will disrupt global supply chains. (Hartatik)

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