Indonesia's economic situation is expected to improve soon, as the government is preparing a number of recovery plans, Coordinating Minister for Economic Affairs Airlangga Hartarto has said.
During a virtual discussion entitled Outlook 2021: Wajah Indonesia Setelah Pandemi (How Indonesia will look after the pandemic) on December 24, Airlangga said he believed that the nation’s economy had started to pick up.
He said: “The signs are already here. The [Covid-19] vaccine’s arrival will increase the public’s confidence and sense of security, which should lead them to restarting their activities. The economy is closely related to [people’s] mobility.”
The minister claimed that Indonesia even managed to control the economic impact of the pandemic better than other Group of 20 (G20) members.
Indonesia recorded a gross domestic product (GDP) drop of 3.5 per cent year-on-year in the July-September period that sent the country into its first recession since the 1998 Asian financial crisis. The contraction however was less severe than the 5.3 per cent year-on-year decline seen in the second quarter.
Despite the economic optimism, Airlangga assured the public that the government would prioritise health care, saying that it had allocated a large portion of the 2021 state budget for the nation’s health sector, including the national vaccination drive.
He said: “The government has allocated between 63 and 73 trillion rupiah [$4.4 and 5.1 billion] to support the vaccination programme.”
In order to improve the economic situation, the government has also launched social protection programmes to boost people’s purchasing power. Airlangga explained that the government had allocated 48.8 trillion rupiah to assist the small enterprise sector next year.
Meanwhile, Minister of Finance Sri Mulyani Indrawati said last week that the government projected a GDP contraction of between 1.7 and 2.2 per cent this year driven by shrinking household spending, which accounts for more than half of Indonesia’s GDP.
This figure was lower than the ministry’s previous forecast in September, in which the government predicted an economic contraction of 0.6 to 1.7 per cent.
“We expect household spending to contract by around 2.6 to 3.6 per cent due to rising Covid-19 cases in December that triggered tighter restrictions,” Sri Mulyani said during a December 21 virtual press briefing.
The Asian Development Bank (ADB) and World Bank have also lowered their projections for Indonesia’s economy this year. Both institutions expect Indonesia’s economy to contract by 2.2 per cent this year, as opposed to previous forecasts of a GDP contraction of one and 1.6 per cent, respectively.
Sri Mulyani went on to say that she also expected investment, which serves as one of the major contributors to Indonesia’s GDP, to contract this year.
She said: “We expect investment to shrink at about 4.4 to 4.5 per cent in 2020.”
However, she believes that the contraction of investment in the fourth quarter will improve to around four to 4.3 per cent, from the negative 6.5 per cent recorded in the third quarter, following increasing sales of commercial vehicles as well as capital goods imports.
THE JAKARTA POST/ANN