Finance minister, Sri Mulyani Indrawati, sees that Indonesian economy still contracted in the range minus 1 percent to 0.1 percent in the first quarter (1Q) of 2021 - Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Finance minister, Sri Mulyani Indrawati, sees that Indonesian economy still contracted in the range minus 1 percent to 0.1 percent in the first quarter (1Q) of 2021. The reasoned, she said, the people’ purchasing power showed by slowing inflation at 1.38 percent during last month due to the COVID-19 pandemic.

“We expect it to be in the neutral zone, closer to minus 0.1 percent,” she told reported virtually on Tuesday (03/23).

However, the treasury officer emphasized that the domestic economy has room to revive in the 2Q of 2021 with more massive vaccinations and increased community mobility, the ‘wheels’ of the economy can spin faster. Indrawati also observed the movement in US treasury yields to Indonesian economy and financial markets.

In addition, the Federal Reserves statement that it would not raise the benchmark interest rate even though US inflation touched 2 percent become her concern. She asserted, “This is something we need to protect. This needs to be watched out for, especially world trends related to the adjustment policies taken and their impact on the Indonesian economy.”

Earlier, senior economic minister, Airlangga Hartarto, sees Indonesian economy to recover in the first quarter of 2021 between 1.3 to 1.8 percent after contracted 2.19 percent in the last quarter of last year. To reached the targets, he emphasized, the government aimed to boost public consumption.

“Usually in the first quarter, the (consumption) is low, between 3 and 4 percent. We will encourage this to increase by 4 to 5 percent,” he said virtually on Friday (02/05), by adding, the investment, which last year minus 4.1 percent, will turn to grow by 3 – 4 percent.

While, head of fiscal policy at finance ministry, Febrio Kacaribu stated, to support the realization in 2020, his office will continue the countercyclical policy in this year. This reflected in the 5.7 percent deficit in the 2021 State Budget. The government will also remain focused on the Economic Recovery Program (ERP) to support the household and business sector and will continue to focus on the anticipatory and responsive steps in suppressing the spread of the COVID-19 pandemic.

”Integrated policy coordination and synergy in the context of accelerating economic recovery is urgently needed to assist economic actors to remain resilient and begin to expand their businesses to take the momentum of economic recovery,” he asserted.

In the periodic meeting of Financial System Stability Committee, the board decided to issue an Integrated Policy Package to Increase Business Financing in the context of the acceleration of ERP. The Indonesian economy is predicted to improve in 2021, supported by progress in handling COVID-19, vaccinations program, global economic recovery, as well as stimulus and policies.

The global economy is predicted to grow in the range of 5 percent in this year, which will boost trade volumes and global commodity prices. Financial market uncertainty is predicted to subside, the direction of the new United States fiscal policy, large global liquidity, and low interest rates.

On the domestic side, the development of a number of early indicators by the end of December 2020 also support the direction of the economic recovery. This was reflected in the improvement in the manufacturing Purchasing Managers’ Index and the strengthening of consumer confidence index.

Indonesia’s balance of payments also projected to surplus, bolstered by a current account deficit around 1.0 – 2.0 percent, influenced by positive growth in exports and imports are predicted to rise to meet the rising domestic demand. The committee also sees, the inflation will remain under control around 3 percent.

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