Global Economy Slowing Down, OJK Remains Optimistic

The Financial Services Authority (OJK) has stated that global economic growth projections for this year will be slower, partly due to the escalation of geopolitical conflicts affecting global commodity price fluctuations. However, the OJK assesses that Indonesia’s financial services sector remains sufficiently stable.

“Global economic growth in 2026 is expected to be lower than in 2025, although it is better than previous growth projections, supported by increased investment and trade related to AI development. Nevertheless, the sustainability of growth momentum still faces challenges from rising global inflation due to the escalation of geopolitical conflicts, which has once again raised oil prices, as well as a very strong El Niño that has the potential to drive up food and agricultural commodity prices,” said the Chair of the OJK Board of Commissioners, Friderica Widyasari Dewi, during a press conference for the Monthly Board of Commissioners Meeting (RDKB) in October 2026, held online on Monday (5/10/2026).

Friderica, often referred to as Kiki, explained that rising inflation has driven ‘higher for longer’ global interest rate policies. This is evidenced by the rise in policy interest rates in the United States, Europe, and Japan, while markets still expect interest rate hikes at the end of 2026 and continuing into 2027.

“Government bond yields have also reached their highest levels in the last decade, with US and European government bond yields returning to levels seen before 2008, and Japanese yields returning to levels seen before 1997. This increase is also influenced by the high demand for government financing and the increased issuance of long-term bonds by hyperscalers for AI-related investments,” she added.