The International Monetary Fund (IMF) has lowered Indonesia' economic growth to 4.3 percent in this year compared to the February' projection at 4.8 percent and in October last year would accelerate to 6.1 percent - Photo by Jakarta Regional Office

JAKARTA (TheInsiderStories) – The International Monetary Fund (IMF) has lowered Indonesia’ economic growth to 4.3 percent in this year compared to the February’ projection at 4.8 percent and in October last year would accelerate to 6.1 percent. The Fund also estimated that the five largest developing countries in Southeast Asia will collectively grow by 4.9 percent in 2021, down from the previous estimation of 5.2 percent.

The revision due to an increase in COVID-19 cases and the reintroduction of lockdowns in several regions in several Southeast Asian countries, said the agency. But, the Fund increased its growth forecast for the wider Asia-Pacific region from 7.3 percent to 7.6 percent in the same year. It also raised its 2021 growth projection for the global economy from 5.5 percent to 6 percent.

“We are worried about the prospects for tourism, when the sector will reopen. Indonesia, Malaysia and the Philippines were among those who had to tighten some restrictions this year following a spike in the coronavirus cases and the vaccinations go slower than most countries in the world,” said he deputy director, Jonathan Ostry, said virtually on Wednesday (04/14).

Based on Our World data, 3.76 percent Indonesians have received at least one dose of the vaccine, lower than the global rate a 5.76 percent.  While Malaysia and the Philippines were 1.8 percent and 0.96 percent, respectively.

Ostry rated, developed economies such as Japan, South Korea, Australia, and New Zealand were behind the brighter Asia – Pacific prospects this year. Among developing economies, the IMF is increasing its growth projections for China and India.

China is now expected to grow 8.4 percent in this year, higher than the previous forecast of 8.1 percent and India is projected to grow 12.5 percent, higer than the previous prediction at 11.5 percent. Earlier, Geoffrey Okamoto, first deputy managing director of IMF, rated China has already completed its recovery, returning to its pre-pandemic growth levels ahead of all large economies.

But the growth still lacks balance, with private consumption lagging investment and its expect the consumption will catch up, as investment growth normalizes. While, low-income countries might not see significant vaccination well into 2022. Another risk is the spread of resistant mutations that threatens to reduce the efficacy of current vaccines and could undermine or delay the recovery.

“We project that cumulative income per capita in emerging and developing countries, excluding China, between 2020 and 2022 will be 22 percent lower than what it would have been without the pandemic. That will translate into close to 90 million people falling below the extreme poverty threshold since the pandemic started,” he noted.

According to Okamoto, besides these bigger issues, there are also uncertainties about the effectiveness of policy actions and differences in what countries can do. Some countries face limited fiscal space and higher debts, while China still has some room for maneuver, many others, especially low-income countries, do not.

Tighter financial conditions could exacerbate vulnerabilities in countries with high public and private debt. We have seen recent increases in bond yields as the growth outlook of some advanced economies improves, leading markets to expect an earlier withdrawal of monetary stimulus.

In the medium-term, he continued, the crisis could leave deep scars. In the past, advanced economies have seen their output reduced almost 5 percent below pre-recession trends five years after the beginning of a recession. It could be worse in countries that cannot afford a strong macroeconomic response or have large services sectors more affected by the pandemic.

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