New normal, Indonesia optimistic about economic growth | Bahasa

Indonesia, 11 Aug 2020 - The Covid-19 pandemic has not shown any signs of abating anytime soon. The number of positive cases has until July 2020 continued to increase each day. However, the government decided to implement a new policy to adapt to new habits or new normal to support national economic recovery.

To support the shift to the new normal, the Ministry of Finance has increased the budget allocation for Covid-19 handling, from Rp677.2 trillion to Rp695.2 trillion, to help drive the economy, particularly during the new normal phase, Minister of Finance Sri Mulyani Indrawati said at the launch of the Indonesia Economic Quarterly (IEQ) in June 2020.

The additional budget for Covid-19 handling will cover health costs (Rp87.55 trillion), social protection (Rp203.9 trillion), business incentives (Rp120.61 trillion), MSME assistance (Rp123.46 trillion), corporate financing (Rp537.57 trillion), and ministries/institutions and local governments (Rp106.11 trillion).

Director of Center for Macroeconomic Policy, Fiscal Policy Agency, Ministry of Finance Hidayat Amir said in an online discussion with the media on 17 June that the figures were temporary and that the final figures would be incorporated into the revised Presidential Regulation Number 54/2020.

Previously, in early June 2020, Coordinating Minister for Maritime Affairs and Investment Luhut Binsar Pandjaitan said in an online discussion with the media that the government planned to increase the amount of stimulus for the handling of the Covid-19 pandemic and its impact on the economy to Rp720 trillion.

The decision to increase the budget allocation for Covid-19 handling was made in the wake of unfavorable forecasts of the global economy due the Covid-19 pandemic. In a video conference entitled “Bill on 2021 State Budget Posture” on 23 July, President Joko Widodo said that he contacted several institutions related to the global economic forecasts, such as the Organisation for Economic Co-operation and Development (OECD), which predicted that Indonesia’s economy would grow minus 6 percent to minus 7.6 percent while the World Bank predicted a negative growth of minus 5 percent.

Apart from the OECD and the World Bank. the International Monetary Fund (IMF) in its report entitled “World Economic Outlook Update: A Crisis Like No Other, An Uncertain Recovery” cut Indonesia’s economic growth projection to minus 0.3 percent. However, Bank Indonesia Senior Deputy Governor Destry Damayanti said in an online discussion titled “Do we need ‘Helicopter Money’ during the Covid-19 crisis?” on 25 June that BI was still confident that the national economy would show a positive growth. Destry said that the central bank had no plans to revise its 2020 economic growth forecast, at 0.9 percent to 1.9 percent.

On a similar note, the “DBS Chief Investment Office (CIO) Insights” projected that Indonesia’s economy will recover quickly after the pandemic. The “DBS CIO Insights” said in its analysis that the Indonesian and Singaporean markets are the most prospective in Southeast Asia in the new normal phase.

“DBS CIO Insights” for the third quarter of 2020 said that Asian economies - excluding Japan – will recover the fastest post-Covid-19 pandemic thanks to the relatively good handling of the pandemic.

In Asia, the report recommends China and Singapore. DBS also adds that Indonesia will benefit from the demographic factor because of the large young working-age population involved in digital economy. Meanwhile, in ASEAN, DBS recommends Indonesia and Singapore. The report also says that DBS believes that Indonesia will soon return to normalcy after the government’s policies on restrictions are lifted. In essence, Indonesia is an independent country with a population of young workers and domestic consumption that can accelerate economic recovery.

Besides benefiting from the young working-age population, Destry said Indonesia has other advantages, namely the country's quite strong domestic economy. This advantage is not shared by other countries that according to the IMF will see negative growth. Destry added that from a financial point of view, Indonesia's investment returns are still attractive to foreign investors.

“CIO Insights” 3Q20 also appreciates Bank Indonesia and the Indonesian government for providing support through key rate cuts and stimulus package for economic recovery.

 

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