Finance minister, Sri Mulyani Indrawati sees Indonesian economic growth will contraction 2 percent in the third quarter (3Q) of 2020 - Photo by MoF Office

JAKARTA (TheInsiderStories) – Finance minister, Sri Mulyani Indrawati sees Indonesian economic growth will contraction 2 percent in the third quarter (3Q) of 2020. For the whole year, she projects the Southeast Asia largest economy to grow in the range of -1.1 percent to 0.2 percent. If that happened, technically, Indonesia has enter the recession.

“Pandemic is still the main factor determining our economic activities and recovery. The improvement in July is still continuing, but we see signs that it is still very fragile. The main keys are consumption and investment. If consumption is still negative even the government has all out, it will be difficult to enter neutral this year,” she told reporters during a virtual conference on Thursday (08/25).he explained.

The minister explained, Indonesia’ gross domestic product (GDP) contraction in the second quarter mainly occurred on the consumption and investment side. This is partly due to restrictions on community mobility in line with the implementation of the large-scale social distancing. The state budget stimulus in the form of social assistance for the poor, vulnerable to poverty, and affected by the COVID-19 pandemic is very helpful to contain a deeper economic contraction, she adds.

She continued, the realization of state revenues by the end of July had reached Rp922.25 trillion (US$63.17 billion) or 54.25 percent of the 2020 State Budget target, but grew negatively at 12.37 percent compared to last year (YoY). The realization of tax revenues recorded of Rp601.91 trillion or 50.21 percent of this year’ target, customs and excise worth of Rp109.06 trillion or 53.02 percent of the targets or grew by 3.71 percent (YoY), and non-tax revenues of Rp208.81 trillion or 70.99 percent of the targets.

While, the realization of state expenditure in the same period amounted to Rp1,252.42 trillion or around 45.72 percent of this year’ ceiling, including the realization of central government spending of Rp793.60 trillion or grew 4.25 percent (YoY) and realization of transfers to regions and village funds of Rp458.82 trillion or a negative growth of 3.4 percent (YoY).

Indrawati also reported that the realization of the budget deficit until the end of July was recorded at Rp330.17 trillion or around 2.01 percent of GDP. The realization of budget financing until July 2020 has reached IDR 502.97 trillion (48.40 percent of this year’s ceiling), mainly sourced from debt financing.

Realization of debt financing by the end of July of 2020 reached Rp519.22 trillion, consisting of state bond (net) Rp513.41 trillion and loans (net) of Rp5.81 trillion. The government has also realized investment financing expenditures of Rp16.50 trillion, of which capital injection disbursements to state-owned enterprises Rp9.50 trillion and investment to state agency amounting to Rp7.00 trillion.

Last month, she continued, the government has successfully entered the Japanese market with the issuance of JPY100 billion ($943.04 million) of Samurai bonds, which are the first sovereign issues on the Japanese market for 2020 and the first issuance from an Asian publisher after the pandemic. The government has also issued retail bond with total sales of Rp18.34 trillion.

In addition, the government and Bank Indonesia (BI) continue to work together and carry out intensive coordination in efforts to restore the national economy as stipulated in the bilateral agreement. The central bank has bought the state bonds Rp42.956 trillion in the primary market, Rp82.1 trillion in burden sharing scheme for spending on public goods groups, and Rp22 trillion for fulfilling non-public goods financing.

US$1: Rp14,600, JPY106.04

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