Home News Hartarto: Indonesia’s Economy to Contract 0.49% in This Year

Hartarto: Indonesia’s Economy to Contract 0.49% in This Year

Senior economic minister, Airlangga Hartarto sees that Indonesian economy will contracts 0.49 percent in 2020 due to the impact of the pandemic - Photo by CMEA Office

JAKARTA (TheInsiderStories) – Senior economic minister, Airlangga Hartarto sees that Indonesian economy will contracts 0.49 percent in 2020 due to the impact of the pandemic. In his presentation in one virtual seminar on Wednesday (08/12), he estimated that the Indonesian economy -1 percent in the third quarter (3Q) and in the 4Q of 2020 grow positive 1.38 percent compared to previous year.

To help the the economic growth in the second half, he said, the government aimed to boost the ministries and institutions spending in the 3Q of 2020. In addition, President Joko Widodo’ administration plans to increasing capital and goods spending also provide stimulants and subsidies to corporations and workers.

“The government must protect the health and livelihoods of the population. The health sector will be the main concern in 2020 – 2021, and this can be seen from its activities and budget. Then, in 2022 and 2023 there will be health and economic recovery,” he told members of Indonesian Employers Association.

In the 2Q of this year, Indonesia’ economic growth experienced a contraction of 5.32 from a year ago or down from 2.97 percent in the 1Q of 2020. In terms of expenditure, growth in household consumption contracted by 5.51 percent in annual basis (YoY) and government consumption by -6.9 percent (YoY).

From a sectoral sides, transportation and warehousing were the sectors with the deepest contraction of 30.84 percent followed by accommodation also food and beverage dropped by -22.02 percent. However, the agricultural sector was still able to grow positively by 2.19 percent and the information and communication sector which had high growth at 10.88 percent.

“For sectors that are deeply affected, the government will push with policies and stimulants. There will be a scheme for hotels and restaurants, because most of the spending is from domestic,” he added.

Earlier, finance minister Sri Mulyani Indrawati sees, the downward trend in the global economy is transmitting rapidly to the national economy, causing disruption on the demand and supply sides. Currently, the government uses the 2020 State Budget as the main instrument to tackle the impact of the epidemic and for the National Economic Recovery Program.

The minister rated the deepest impact of the virus happened in May and will improve in 3Q and 4Q into the positive zone. By the end of this year, she estimated the economic growth will ended in the range -0.4 percent to 2.7 percent of GDP. in 2019, the Southeast largest economy rose 5.0 percent of the GDP.

“With the dynamics that occurred in Indonesia in the second quarter our economy will be quite depressed and there will be a correction and we can minimize it in the following quarters,” said Indrawati on July 9.

Finance ministry reported in the first semester (1H) of 2020 the realization of budget deficit at 1.57 percent of GDP in line with the decline in state revenues due to the economic slowdown. While, the government spending still grow positively in order to support the handling of the impact of COVID-19.

She said, the economic growth in the second semester is expected to improve and macroeconomic stability is maintained. To that, the economic growth is projected to be able to grow positively with the support of the NRP program. The stimulus program also its expecting to encourage the consumption in this semester, including investment.

As reported, various international institutions provide various projections on Indonesia’ economic growth, which shows the high uncertainty, especially in 2020. The International Monetary Fund predicts the Indonesian economy at -0.3 percent and the World Bank mentions zero growth. The OECD also projects the Indonesian economy to be at – 3,9 to -2.8, while ADB projected -1 percent.

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