DBS eTalk Series: How Important is Vaccination in Indonesia's Economic Recovery? | Bahasa
Indonesia.09 Jun 2021.3 min read
Bank DBS Indonesia shares views on Indonesia's economic growth as Covid-19 vaccination program is underway
Indonesia, 09 Jun 2021 - The Covid-19 pandemic, now entering the second year, has shown no signs of abating anytime soon. This, however, did not deter countries, including Indonesia, from taking steps to restore their economy that has been hard hit by the pandemic. In response to the current situation, Bank DBS Indonesia has maintained the commitment to providing the latest perspectives on economic and investment trends through the DBS eTalk Series to help customers recognise opportunities in managing, developing, and protecting their assets amidst the current uncertainties. The latest DBS eTalk Series focused on issues related to efforts to accelerate Indonesia's economic recovery and growth in the second quarter of 2021. According to experts, an acceleration of the vaccination programme will help speed up national economic recovery.
At the latest DBS eTalk Series webinar entitled “Indonesia: Accelerating Recovery & Growth in 2021” (25/5), Minister of State-Owned Enterprises (BUMN) Erick Thohir shared his insights on national economic recovery and the intensification of the Covid-19 vaccination programme. “In general, the number of confirmed daily cases of Covid-19 is still under control, with an active case rate of 5% and a cure rate of 92%, better than the global figures, at 10% and 88%, respectively. Although the economy still contracted in the first quarter of 2021, various indicators show that it is still following a positive upward trend. Among the positive indicators are the realisation of the national economic recovery programme, which until May 11, 2021, has reached 24.6%, government consumption growth of 2.96% yoy, household consumption, which, while still contracted -2.2% yoy, improved from -3.61% yoy in the previous month.”
Erick said he was optimistic that the momentum for economic recovery would continue in the second quarter of 2021, and that Indonesia would be able to achieve an economic growth rate of around 4-5% with a midpoint of 4.5% in 2021. To that end, Erick said the government had prepared several key strategies. "The government will continue the national economic recovery programme (PEN) as the main instrument for boosting Indonesia’s economy in 2021. For the second quarter, the government will continue to offer incentives for strategic social assistance programmes and optimise the utilisation of Special Economic Zones in the second quarter of 2021.
The Ministry of SOEs has a significant role in the vaccination programme. "In addition to securing vaccine supplies until 2022, we also set up BUMN vaccination centres to accelerate the vaccination programme at five points in four cities with a target of 5,000 people/day/point. So far, we have administered one million doses of vaccine through the BUMN vaccination centres. In addition, together with the Chamber of Commerce and Industry (Kadin), we have launched the Gotong Royong independent vaccination programme for workers. The programme has received enthusiastic response from 22,700 companies,” Erick added.
On the same occasion, DBS Group Research economist Radhika Rao also shared his views on the current economic growth and post-recovery projections. He stated that in 2021, the vaccination programme will be the primary factor distinguishing one country from another, depending on two factors: access to supplies and speed of delivery. “In Indonesia, the government's vaccination programme will most likely be supported by good cooperation between the government and the private sector, which will not only accelerate vaccine distribution but also increase efficiency. An efficient vaccination programme will ensure an increase in the number of people vaccinated by the end of 2021, from nearly 6% who received the first dose at the end of May. This will help normalisation of activity, especially in terms of consumption demand, and revive the economy in the long term,” said Radhika Rao, Senior Vice President, DBS Economics and Macro Strategy, DBS Bank.
Indonesia Stock Exchange (BEI) Commissioner Pandu Sjahrir also presented a positive view on Indonesia’s capital market. Pandu found an interesting fact, that the Community Activity Restrictions (PPKM) during the Covid-19 pandemic encouraged young investors to invest and follow the growth trend of the capital market. “The Indonesia Capital Market ended 2020 on a high note, with 51 companies reporting an additional 1.4 million new investors with a median age of 28 years old. This optimism continued through 2021 with the highest trading transaction value in history (daily transaction value on the IDX) during the period January 2020 to May 2021 (year-to-date/ytd). Therefore, despite the economic uncertainty in the midst of the pandemic, we see optimism will be maintained, even until 2022. This is driven by the vaccination programme that is quite advanced in terms of purchasing and availability of vaccines. In addition, the initiatives that will be carried out through the Omnibus Law will also be very positive.”
Meanwhile, Batavia Prosperindo Asset Management President Director Lilis Setiadi said the domestic economy has improved in line with improvements in the GDPs of other countries. "In the fourth quarter of 2020, Indonesia's GDP was still around -2%. Then, in the first quarter of 2021, it remained negative at -0.7%, although it improved by 1.5%. We see improvements in sales figures in certain sectors, including automotive, property and cement, as well as indices such as the Purchasing Managers’ Index and the Consumer Confidence Index. With issuers’ aggregate earnings decreasing by around 22% in 2020, we believe that in 2021, with improved economic growth, issuers may expect a rebound aggregate earnings of roughly 25-30%.”
Therefore, vaccination plays an important role in determining the pace of Indonesia's economic recovery. “In view of the rate of the national vaccination programme, both provided by the government and the independent programme that started several weeks ago, I see that the number of people who have received the vaccines is quite encouraging so that it tends to support a stronger economy going forward. This can be a conducive environment to further improve performance in 2021,” Lilis said.
At the latest DBS eTalk Series webinar entitled “Indonesia: Accelerating Recovery & Growth in 2021” (25/5), Minister of State-Owned Enterprises (BUMN) Erick Thohir shared his insights on national economic recovery and the intensification of the Covid-19 vaccination programme. “In general, the number of confirmed daily cases of Covid-19 is still under control, with an active case rate of 5% and a cure rate of 92%, better than the global figures, at 10% and 88%, respectively. Although the economy still contracted in the first quarter of 2021, various indicators show that it is still following a positive upward trend. Among the positive indicators are the realisation of the national economic recovery programme, which until May 11, 2021, has reached 24.6%, government consumption growth of 2.96% yoy, household consumption, which, while still contracted -2.2% yoy, improved from -3.61% yoy in the previous month.”
Erick said he was optimistic that the momentum for economic recovery would continue in the second quarter of 2021, and that Indonesia would be able to achieve an economic growth rate of around 4-5% with a midpoint of 4.5% in 2021. To that end, Erick said the government had prepared several key strategies. "The government will continue the national economic recovery programme (PEN) as the main instrument for boosting Indonesia’s economy in 2021. For the second quarter, the government will continue to offer incentives for strategic social assistance programmes and optimise the utilisation of Special Economic Zones in the second quarter of 2021.
The Ministry of SOEs has a significant role in the vaccination programme. "In addition to securing vaccine supplies until 2022, we also set up BUMN vaccination centres to accelerate the vaccination programme at five points in four cities with a target of 5,000 people/day/point. So far, we have administered one million doses of vaccine through the BUMN vaccination centres. In addition, together with the Chamber of Commerce and Industry (Kadin), we have launched the Gotong Royong independent vaccination programme for workers. The programme has received enthusiastic response from 22,700 companies,” Erick added.
On the same occasion, DBS Group Research economist Radhika Rao also shared his views on the current economic growth and post-recovery projections. He stated that in 2021, the vaccination programme will be the primary factor distinguishing one country from another, depending on two factors: access to supplies and speed of delivery. “In Indonesia, the government's vaccination programme will most likely be supported by good cooperation between the government and the private sector, which will not only accelerate vaccine distribution but also increase efficiency. An efficient vaccination programme will ensure an increase in the number of people vaccinated by the end of 2021, from nearly 6% who received the first dose at the end of May. This will help normalisation of activity, especially in terms of consumption demand, and revive the economy in the long term,” said Radhika Rao, Senior Vice President, DBS Economics and Macro Strategy, DBS Bank.
Indonesia Stock Exchange (BEI) Commissioner Pandu Sjahrir also presented a positive view on Indonesia’s capital market. Pandu found an interesting fact, that the Community Activity Restrictions (PPKM) during the Covid-19 pandemic encouraged young investors to invest and follow the growth trend of the capital market. “The Indonesia Capital Market ended 2020 on a high note, with 51 companies reporting an additional 1.4 million new investors with a median age of 28 years old. This optimism continued through 2021 with the highest trading transaction value in history (daily transaction value on the IDX) during the period January 2020 to May 2021 (year-to-date/ytd). Therefore, despite the economic uncertainty in the midst of the pandemic, we see optimism will be maintained, even until 2022. This is driven by the vaccination programme that is quite advanced in terms of purchasing and availability of vaccines. In addition, the initiatives that will be carried out through the Omnibus Law will also be very positive.”
Meanwhile, Batavia Prosperindo Asset Management President Director Lilis Setiadi said the domestic economy has improved in line with improvements in the GDPs of other countries. "In the fourth quarter of 2020, Indonesia's GDP was still around -2%. Then, in the first quarter of 2021, it remained negative at -0.7%, although it improved by 1.5%. We see improvements in sales figures in certain sectors, including automotive, property and cement, as well as indices such as the Purchasing Managers’ Index and the Consumer Confidence Index. With issuers’ aggregate earnings decreasing by around 22% in 2020, we believe that in 2021, with improved economic growth, issuers may expect a rebound aggregate earnings of roughly 25-30%.”
Therefore, vaccination plays an important role in determining the pace of Indonesia's economic recovery. “In view of the rate of the national vaccination programme, both provided by the government and the independent programme that started several weeks ago, I see that the number of people who have received the vaccines is quite encouraging so that it tends to support a stronger economy going forward. This can be a conducive environment to further improve performance in 2021,” Lilis said.
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