Finance Minister Sri Mulyani Indrawati said Indonesia' economic growth in the third quarter (3Q) of 2020 still in the negative territory between (1.7 percent) to (0.6 percent) - Photo by MoF Office

JAKARTA (TheInsiderStories) – Finance Minister Sri Mulyani Indrawati said Indonesia’ economic growth in the third quarter (3Q) of 2020 still in the negative territory between -1.7 percent to -0.6 percent. Its means, the Southeast Asian larger economy enters the recession period after experienced negative growth in two quarters.

“Negative territory will occur in the third and fourth quarter. For next year we sees our economy grow around 4.5 – 5.5 percent with a median forecast of 5.0 percent. But, all of this depends on the forecast for COVID-19 and how it affects our economy,” she told reporters in a virtual conference on Tueday (09/22).

Indrawati also reported, based on the ministry data, the household consumption is in the range of -3 percent to – 1.5 percent, government consumption 9.8 to 17 percent, investment -8.5percent to -6.6 percent, exports in the range of -13.9 percent to -8.7 percent, and imports contraction 26.8 to 16 percent.

“Overall in 2020, the ministry of finance’ projection our economy (will be contraction) 1.7 to 0.6 percent,” said the minister.

For background, in the 1Q of 2020, Indonesian economy was still positive at 2.97 percent. But, starting second quarter entered minus growth by contraction 5.32 percent.

Last August, Indrawati has revised Indonesian economic growth targets in 2020 in the range of -0.2 to -1.1 percent of gross domestic product (GDP) from initially 2.3 percent of GDP. But, in 2021, she is optimistic that the country’ economic growth will return to positive in the range of 4.5 – 5.5 percent.

In this year, the inflation rate is predicting around 2.0 – 4.0 percent, interest rate 3.0 – 4.0 percent, Indonesian Rupiah 14,400 to 14,800 per US Dollar, oil price US$35 – 40 a barrel, oil lifting 705,000 barrels per day, and gas lifting 992,000 barrels equivalent per day.

“To withstand the negative impact of the pandemic on the economy, the government has and will continue to take extraordinary policy steps to maintain and restore the health, socio-economic conditions of the community and the business world,” she said on August 14.

The economic recovery through the National Economic Recovery program is also carried out to prevent a deeper contraction and restore the demand side, such as consumption, investment and exports, as well as the supply side or the production side. These steps are expected to have a positive impact on economic growth in the third and fourth quarters of 2020, so that the performance of economic growth in 2020 can be maintained in a positive zone, she adds.

Indrawati conveyed, fiscal policy through the state budget instrument will continue to play a vital role in the remainder of 2020 to hold the economy from a deeper decline, as well as in 2021 in the context of accelerating economic recovery and strengthening reforms, with the important points in the draft of next year’ State Budget.

For 2021, she estimates that state revenues is Rp1,776.4 trillion (US$120.84 billion) and state expenditure is IDR 2,747.5 trillion and a deficit of Rp971.2 trillion or 5.5 percent of GDP. Tax revenues is estimated to grow 5.5 percent to Rp1,481.9 trillion from last year’ Rp1,404.5 trillion. This year, the tax revenues is estimated to drop 9.2 percent compared to 2018.

Then, excise revenues is estimated to grow by 3.6 percent from Rp. 172.2 trillion to Rp178.5 trillion. This year’ realization was 0.1 percent lower than 2018 valued at Rp172.4 trillion. Meanwhile, this year’ non-tax revenue is estimated to decline 28.1 percent compared to 2019 amounting to Rp294.1 trillion and it is estimated that it is still low by 0.2 percent worth Rp293.5 trillion.

In terms of state spending, the government prepares a health budget of Rp169.7 trillion, social protection Rp419.3 trillion, food security Rp104.2 trillion, infrastructure Rp414.0 trillion, education Rp549.5 trillion, the development of information and communication technology Rp30.5 trillion, energy and non-energy subsidies Rp172.9 trillion, transfers to regions Rp796.3 trillion, and village funds Rp72.0 trillion.

National Economic Recovery Incentive Rp356.2 trillion with a composition of Rp25.4 trillion for the health sector, social protection Rp110.2 trillion, sectoral Rp136.7 trillion, micro, small, and medium enterprises Rp48.4 trillion, business incentives Rp 20.40 trillion, and corporate financing Rp14.9 trillion.

US$1: Rp14,700

Written by Editorial Staff, Email: theinsiderstories@gmail.com