Indonesian economy shrank to minus 2.07 during 2020 from a year ago grew 5.02 percent, the first contraction in over two decades - Photo: Privacy

JAKARTA (TheInsiderStories) – Indonesian economy shrank to minus 2.07 during 2020 from a year ago grew 5.02 percent, the first contraction in over two decades, the statistic bureau reported today. In the fourth quarter of last year, the domestic economy contracted 2.19 percent compared to a year ago 4.19 percent and rebounded from the previous quarter minus 3.49 percent.

Head of the bureau, Suhariyanto, in a virtual conference on Friday (02/05), reported, from the expenditure side, the main source of contraction throughout 2020 was the investment with a contribution 1.63 percent followed by household consumption 1.43 percent. In detail, the investment growth minus 4.95 percent compared to a year ago.

It can be seen in the domestic cement sales which grew by minus 10.38 percent, auto sales contracted 41.83 percent, import values of capital good negative 16.73 percent, and household consumption contracted 2.63 percent in annual basis. The contraction was driven by the low purchasing power, he adds.

Its also reflected in retail sales that stood at minus 12.03 percent, consumer good imports negative 10.93 percent, wholesale passenger car and motorcycle sales contracted by minus 50.49 percent and minus 43.54 percent, respectively.

In the fourth quarter, the transportation and warehousing sectors experienced the deepest contraction of 13.42 percent. Export of the component of goods and services export experienced minus 7.21 percent. While, import of goods and services contracted by 13.52 percent from the same quarter in 2019.

When compared to the previous quarter, the deepest contraction occurred in agriculture, forestry, and fishery sectors minus 20.15 percent. From the expenditure side, the highest growth was achieved by the government spending grew by 27.15 percent.

End of last year, finance ministry, Sri Mulyani Indrawati, has revised down the economic growth between minus 2.2 to 1.7 percent due to hight pressured from the COVID-19 pandemic. In August, she still optimistic the economy only contraction 1.1 to 0.1 percent.

She said, the growth is sloping due to the weak household consumption and people’ purchasing power. The minister also reported as of November, the country experienced a budget deficit Rp883.7 trillion (US$63.12 billion) or equivalent to 5.6 percent of the Gross Domestic Product (GDP).

The caused was the state revenues only reached Rp1,423 trillion while the state expenditures were Rp2,306.7 trillion. Indrawati revealed, the realization of the state revenue was still 63.7 percent of 2020′ target and also 15.1 percent below to the same month in 2019 due to limited economic activity.

Tax revenues was recorded of Rp1,108.8 trillion or 59.4 percent of the target or contracted 15.5 percent from November 2019. But, non-tax revenues has excess this year targets worth of Rp301.9 trillion. However, compared to one year ago it still lowered 15.9 percent.

On the expenditure side, central government spending stood at Rp1,558.7 trillion or equivalent to 78.9 percent of this year’ target and 12.7 percent above the same period of the previous year. In November, said Indrawati, transfer to the regions and village funds was Rp748 trillion, 97.9 percent of the targets and 0.7 percent below the realization in November 2019.

She 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 and expenditure is Rp2,747.5 trillion with a deficit of Rp971.2 trillion or 5.5 percent of the GDP. Tax revenues is estimated to grow 5.5 percent to Rp1,481.9 trillion and the excise revenues is estimated to grow by 3.6 percent from Rp172.2 trillion to Rp178.5 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’ incentives 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: Rp14,000

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