US-China trade war ‘second wave’ could cause long lasting damage, Indonesia’s finance minister says
- Sri Mulyani Indrawati says damage ‘is not quantifiable at this moment’ but will be significant, and could thrust the world into ‘a totally uncertain era’
- Volatile markets, together with the brittle state of the world economy and new flash points such as Hong Kong, have fed fears of a global recession
The global economy could be hit by a second wave of damage from the US-China trade war which will be much more severe than the first, according to Indonesia’s finance minister.
The outlook for global growth has already been cut amid the dispute between the world’s two largest economies, but the escalation in hostilities since then has “created a point of no return,” said Sri Mulyani Indrawati.
Damage from this second wave “is not quantifiable at this moment” but will be significant, and could thrust the world into “a totally uncertain era.”
“No one now has the trust or belief about how international disputes must and should be settled,” Indrawati said. “I think this secondary damage is going to be much, much more long lasting beyond a certain political regime.”
Since the International Monetary Fund cut its global growth forecast in July, tensions between the United States and China have ratcheted up and a deal appears more distant.
Volatile markets, together with the brittle state of the world economy and new flash points such as Hong Kong, have fed fears of a global recession.
“This is something that needs to be addressed globally by all the leaders, regardless of their short-term interests,” Indrawati said.
The type of coordinated policy response seen during the global financial crisis a decade ago could help counter the threat, she said, but right now “it seems like the world is heading in a direction that nobody wants”.
“The policy action is not coherent,” she said. “That’s creating very weak confidence among many economic players in the world in the ability of leaders or decision makers to actually avert or avoid this recession.”
Indonesian President Joko Widodo announced next year’s budget on earlier this month, projecting Indonesia’s economy to grow 5.3 per cent next year.
Since the assumptions underlying the budget were set, however, “the world’s economic condition has not improved, it has even worsened,” Indrawati added.