How ready is Indonesia to revive the economy after the pandemic? | Bahasa
Indonesia.14 Sep 2020.3 min read
Indonesia, 14 Sep 2020 - 2020 is a challenging year for Indonesia. Economic growth, which was set at more than 5% at the beginning of this year, has been hampered by the Covid-19 pandemic that broke out in early March. Following are expert’s views on Indonesia's current economic and political conditions in the midst of the pandemic and efforts to revive the economy shared at DBS Asian Insights Conference 2020 held virtually entitled “Navigating a Brave New World” (15/7).
West Java Governor Ridwan Kamil said that Covid-19 has multiple impacts. "The Covid-19 pandemic is not only a health emergency but is also an economic emergency, and a number of countries have even declared a state of social and political emergency."
At the event initiated by PT Bank DBS Indonesia, Indonesian Center of Reform on Economics (CORE) Research Director Piter Abdullah said that Covid-19 has a relatively high risk and must be immediately mitigated. He pointed out that Indonesia must be prepared for bigger challenges in terms of the national economy. "This is the new normal in the midst of a pandemic." Given the enormous challenges, efforts should be made to ensure that Indonesia does not plunge into a crisis.
Therefore, proper measures are crucial to restore the national economy. The Ministry of Finance said that the national economy will be determined entirely by recovery in the third (Q3) and fourth (Q4) quarters. The government is still using the 2020 economic growth scenario at minus 0.4 to 2.3 percent.
To avoid a crisis, the government has prepared several strategies to restore the economy and people’s purchasing power in the midst of uncertainty. The government provides incentives for the public in the form of a six-month delay in income tax collection (PPh) articles 21, 22, and 25. In addition, the government has also relaxed export import duties for the industry sector.
Ministry of Finance Special Advisor Masyita Crystallin also shared her views, stating that the government is collaborating with the central bank to revive the economy following the pandemic. “What we are doing is not printing money or helicopter money. The schemes we are implementing suit the market and remain mere monetary instruments, which will be withdrawn immediately should Bank Indonesia need them.”
To prevent an economic contraction and state budget constraints, the Ministry of Finance has issued global sukuk that offer attractive yields. Masyita stressed that the government's current main priority is public goods in the form of social and health security with an allocation of Rp300 trillion.
Masyita agrees that mitigating economic contraction should be a priority to prevent a major impact on people. Thus, the government formulated budget strategies that are more flexible in dealing with contraction. “The state budget is under pressure in all its aspects,” said Masyita.
Even though compared to other countries the fiscal deficit tends to be moderate and access to the international market is quite good, Indonesia still needs to watch out for pressure on the state budget in the future, which was why the government widened the deficit by 3% for three years in the 2020 state budget posture.
“Why three years? If we stop during the recovery period, we could face a sudden economic shock. If recovery occurs next year, the public and the business world are ready to pick up the pace," said Masyita. Therefore, the 2020 state budget posture allows flexibility for various scenarios as a solution offered by the government.
In addition to fiscal policy as a solution, investment should also be taken into consideration. Investment Coordinating Board (BKPM) Chairman Bahlil Lahadalia underlined two ways that can be pursued. The first strategy is to maintain a balanced distribution of investment in Java and outside Java. He sees a huge opportunity for equitable distribution of investment in Indonesia.
“For the first time in six years, investment realisation outside Java is almost equal to Java, with Java accounting for around 51.4% and outside Java around 48.6%," he said. Bahlil attributed the achievement to infrastructure development outside Java, which is slowly starting to support the investment climate. He cited North Sulawesi and North Maluku as examples; the two provinces are now in the list of the top five investment destinations.
In addition, the BKPM serves not only large investments but also small investments in the regions. The most important thing right now is the realisation of investment that produces import substitutes to increase their economic added value.
Local governments also play a role in the economic recovery process. West Java is optimistic it will become the first province to recover. "We are optimistic that through recovery steps, West Java’s economy will grow 2-3% in December 2020," said Ridwan Kamil. There are seven economic opportunities in the midst of the pandemic, including the implementation of sustainable economic and industrial development.
Apart from issuing various policies, the government also launched stimulus packages. Chief Executive Officer of Landscape Indonesia Agus Sari believes that the stimulus will strengthen the implementation of green economy in Indonesia.
The basic principle of sustainability is synergy of economic, social and environmental factors that are mapped comprehensively. "Everything must be mapped to see which sectors are resilient to all conditions, including the current pandemic. Do not give stimulus to sectors that are vulnerable or even cause damage," said Agus.
Executive Director of the Sustainable District Meeting Circle (LTKL) Gita Syahrani explained that green investment can also be an effective stimulus in overcoming the impact of the Covid-19 pandemic. A number of regions have already adopted the strategy. "Regional governments have implemented innovative policies for sustainable development that protect the environment while improving people’s welfare, such as the Sigi Hijau Regional Regulation and the Siak Hijau Regent Regulation," said Gita.
As a banking institution that is always active in providing comprehensive insights on economics and politics to assist business people in making decisions and determining the direction and goals of their business, Bank DBS Indonesia brought together experts from government bodies, economists and experts in the field of sustainability through DBS Asian Insights Conference 2020.
Bank DBS Indonesia took the initiative to share views not only about Indonesia's economic recovery but also Indonesia's environmental condition or sustainability, and steps that can be taken going forward.
Learn more about Asia’s political and economic condition and how to navigate in the midst of the pandemic from trusted sources at https://aic.dbs.com/.
West Java Governor Ridwan Kamil said that Covid-19 has multiple impacts. "The Covid-19 pandemic is not only a health emergency but is also an economic emergency, and a number of countries have even declared a state of social and political emergency."
At the event initiated by PT Bank DBS Indonesia, Indonesian Center of Reform on Economics (CORE) Research Director Piter Abdullah said that Covid-19 has a relatively high risk and must be immediately mitigated. He pointed out that Indonesia must be prepared for bigger challenges in terms of the national economy. "This is the new normal in the midst of a pandemic." Given the enormous challenges, efforts should be made to ensure that Indonesia does not plunge into a crisis.
Therefore, proper measures are crucial to restore the national economy. The Ministry of Finance said that the national economy will be determined entirely by recovery in the third (Q3) and fourth (Q4) quarters. The government is still using the 2020 economic growth scenario at minus 0.4 to 2.3 percent.
To avoid a crisis, the government has prepared several strategies to restore the economy and people’s purchasing power in the midst of uncertainty. The government provides incentives for the public in the form of a six-month delay in income tax collection (PPh) articles 21, 22, and 25. In addition, the government has also relaxed export import duties for the industry sector.
Ministry of Finance Special Advisor Masyita Crystallin also shared her views, stating that the government is collaborating with the central bank to revive the economy following the pandemic. “What we are doing is not printing money or helicopter money. The schemes we are implementing suit the market and remain mere monetary instruments, which will be withdrawn immediately should Bank Indonesia need them.”
To prevent an economic contraction and state budget constraints, the Ministry of Finance has issued global sukuk that offer attractive yields. Masyita stressed that the government's current main priority is public goods in the form of social and health security with an allocation of Rp300 trillion.
Masyita agrees that mitigating economic contraction should be a priority to prevent a major impact on people. Thus, the government formulated budget strategies that are more flexible in dealing with contraction. “The state budget is under pressure in all its aspects,” said Masyita.
Even though compared to other countries the fiscal deficit tends to be moderate and access to the international market is quite good, Indonesia still needs to watch out for pressure on the state budget in the future, which was why the government widened the deficit by 3% for three years in the 2020 state budget posture.
“Why three years? If we stop during the recovery period, we could face a sudden economic shock. If recovery occurs next year, the public and the business world are ready to pick up the pace," said Masyita. Therefore, the 2020 state budget posture allows flexibility for various scenarios as a solution offered by the government.
In addition to fiscal policy as a solution, investment should also be taken into consideration. Investment Coordinating Board (BKPM) Chairman Bahlil Lahadalia underlined two ways that can be pursued. The first strategy is to maintain a balanced distribution of investment in Java and outside Java. He sees a huge opportunity for equitable distribution of investment in Indonesia.
“For the first time in six years, investment realisation outside Java is almost equal to Java, with Java accounting for around 51.4% and outside Java around 48.6%," he said. Bahlil attributed the achievement to infrastructure development outside Java, which is slowly starting to support the investment climate. He cited North Sulawesi and North Maluku as examples; the two provinces are now in the list of the top five investment destinations.
In addition, the BKPM serves not only large investments but also small investments in the regions. The most important thing right now is the realisation of investment that produces import substitutes to increase their economic added value.
Local governments also play a role in the economic recovery process. West Java is optimistic it will become the first province to recover. "We are optimistic that through recovery steps, West Java’s economy will grow 2-3% in December 2020," said Ridwan Kamil. There are seven economic opportunities in the midst of the pandemic, including the implementation of sustainable economic and industrial development.
Apart from issuing various policies, the government also launched stimulus packages. Chief Executive Officer of Landscape Indonesia Agus Sari believes that the stimulus will strengthen the implementation of green economy in Indonesia.
The basic principle of sustainability is synergy of economic, social and environmental factors that are mapped comprehensively. "Everything must be mapped to see which sectors are resilient to all conditions, including the current pandemic. Do not give stimulus to sectors that are vulnerable or even cause damage," said Agus.
Executive Director of the Sustainable District Meeting Circle (LTKL) Gita Syahrani explained that green investment can also be an effective stimulus in overcoming the impact of the Covid-19 pandemic. A number of regions have already adopted the strategy. "Regional governments have implemented innovative policies for sustainable development that protect the environment while improving people’s welfare, such as the Sigi Hijau Regional Regulation and the Siak Hijau Regent Regulation," said Gita.
As a banking institution that is always active in providing comprehensive insights on economics and politics to assist business people in making decisions and determining the direction and goals of their business, Bank DBS Indonesia brought together experts from government bodies, economists and experts in the field of sustainability through DBS Asian Insights Conference 2020.
Bank DBS Indonesia took the initiative to share views not only about Indonesia's economic recovery but also Indonesia's environmental condition or sustainability, and steps that can be taken going forward.
Learn more about Asia’s political and economic condition and how to navigate in the midst of the pandemic from trusted sources at https://aic.dbs.com/.
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