City of Jakarta, Indonesia - Photo by Flashnet

JAKARTA (TheInsiderStories) – The International Monetary Fund (IMF) has lowered Indonesia’s gross domestic product (GDP) prospects to 4.8 percent in 2020 and 5.1 percent in 2021 due to the continued weakness in exports and weighing on domestic demand. The figures were a downward revision of 0.1 percentage points compared to its outlook released in October 2019.

In October, the fund said Indonesia’s GDP was expected to expand just 5 percent this year — down 0.2 percentage points from its April projection — and 5.1 percent in 2021, down 0.1 percentage points from an earlier forecast.

Indonesia joining Malaysia, the Philippines, Singapore, and Thailand in ASEAN-5 countries that those growths in a downward revision, according to IMF’ World Economic Outlook update released on Monday (01/20).

“After slowing to 4.7 percent in 2019, growth in ASEAN-5 countries is projected to remain stable in 2020 before picking up in 2021,” IMF said, stressing growth prospects have been revised down slightly for Indonesia and Thailand, where continued weakness in exports is also weighing on domestic demand.

Indonesia’s total exports fell 6.9 percent to worth US$168 billion in 2019, while imports shrank 9.5 percent to $171 billion, resulting in a $3.2 billion trade deficit, Statistics Indonesia data showed.

Agricultural exports were the only sector that grew by 5.31 percent, although its contribution to overall exports was still small at 2.16 percent. Exports in the manufacturing industry and the mining sector experienced declines of 2.7 percent and 15 percent respectively. Exports in the oil and gas sector fell 27 percent.

Despite the government’s much-publicized effort to replace imported fossil fuel with locally made biofuel, oil and gas imports remained the bane of Indonesia’s trade, contributing the lion’s share of the deficit. Indonesia bought $9.3 billion-worth more oil and gas than it sold abroad last year. The corresponding value in 2018 was $12 billion.

President Joko Widodo has strived to bring Indonesia’s economy to grow to 5.6 percent in 2020. The figure mainly supported by investment which is expected to increase by 7.0-7.4 percent and exports rose at 5.5-7.0 percent.

On the supply side, economic growth is expected to be supported by the industrial sector which will increase between 5.0-5.5 percent. While the unemployment rate is expected to fall to 4.8-5.0 percent, accompanied by a reduction in the poverty rate in the range of 8.5-9.0 percent.

During his inauguration speech in October, Widodo has pledged to bring up Southeast Asia’s biggest economy’s growth from 5 percent that it suffers for several years. To achieve it, the president has ordered his minister to boost the country’s investment climate.

His administration then introduces the omnibus law designed to replace dozens of overlapping laws viewed as a barrier to investment. Widodo has said the new legislation is vital to boost investment and create jobs, hoping parliament will pass it within 100 days.

Widodo, however, is facing hurdles in getting the landmark omnibus bills passed as the legislature plans to consult with labor unions following protests on Monday and as experts call for a more sustainable approach.

The bill will cover 79 laws, comprising over 1,200 clauses, and aims to streamline business permits, investment requirements and labor laws, said Airlangga Hartarto, coordinating minister for economic affairs. It will simplify permit processes covering 15 sectors including manufacturing, agriculture, energy, and mining, as well as environmental permits and construction.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com