The impact of COVID-19 colored the Indonesian economy faster than expected, said the government officials - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – The impact of COVID-19 colored the Indonesian economy faster than expected, said the government officials. Today, Statistic Indonesia has reported that the Southeast largest economy only growth 2.97 percent of gross domestic product (GDP) in the first quarter (1Q) of 2020.

To prevent the further impact of the virus to the economy, said head of the fiscal policy body at the ministry of finance, Febrio Nathan Kacaribu, the government will prepare various scenarios. He stated, “Every new data will be used for updating the government’ assessment of real and social economic conditions. The aim to formulate anticipatory steps quick and precise.”

According to him, the sharp decline in consumption in the 1Q of 2020, strengthen the urgency to accelerates the distribution of social assistance in the second quarter. From the production side, he explained, the national economic recovery program for micro, medium and small enterprises (MSMEs) is very much critical and needs to be implemented as soon as possible.

“With pads on both side, the government hopes to ease the pressure on households and perpetrator businesses, especially ultra micro and SMEs,” he noted.

Kacaribu revealed, Indonesia’ slowing economic growth is mainly caused of public consumption, which has slipped to 2.84 percent, and investment only grew 1.70 percent. The government consumption, he said, still grew by 3.74 percent, exports grew by 0.24 percent but import contraction -2.19 percent.

He noted, the growth in net exports was supported by positive growth in non-oil and gas. But, export performance was restrained by a decline in the number of tourist arrivals, that were the source of foreign exchange revenues.

On the other hand, imports contracted with negative growth in raw materials and auxiliary materials (-2.8 percent) and goods (-13.1 percent). Each, contributing 75.8 percent and 15.0 percent of total imports. Although this does contribute to the trade surplus of US$2.61 billion.

Kacaribu conveyed, the weakening imports negatively impacted the activity on the production side, especially in the manufacturing sectors. Almost all sectors showed a decline, except for the sector high-growth information and communication 9.81 percent.

The manufacturing industry grew at 2.06 percent has slowing down the manufacturing Purchasing Managers’ Index indicator which recorded the lowest decline in April 2020 (27.5). Trade growth slowed to 1.60 percent, construction 2.90 percent, and agriculture 0.02 percent.

Decline in global commodity prices including coal and crude palm oil also causing the mining and quarrying sector grow by only 0.43 percent. Logistics services at the port also declined along with the transportation and warehousing sector (1.27 percent). Then, accommodation, food and beverages (1.95 percent).

Recently, the International Monetary Fund (IMF) has warned that Indonesia’s economic growth was only 0.5 percent in the year due to the impact of COVID-19, the lowest level since 1998. But, finance minister, Sri Mulyani Indrawati is optimistic that Indonesia’ economic growth this year will still reached 2.3 percent of GDP.

“We and BI (Bank Indonesia) estimate economic growth this year could be in the range of -0.4 to 2.3 percent because household consumption is only 1.6 – 3.2 percent, investment is expected to fall from 6 percent can be negative, exports also expected to be negative because imports have increased, “he told the media through a video conference on April 1.

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