ADB: Slowing Down as a result of COVID-19, Indonesia's economy begins to recover 2021
Source: Media Indonesia
Date: 3 April 2020
Indonesia economy is expected to grow 2.5% by 2020 amid a new coronavirus (COVID-19) pandemic, down from 5.0% in 2019.
According to the Asian Development Bank (ADB) report released today, Friday (3/4).
"Although Indonesia has a strong macroeconomic foundation, the ongoing COVID-19 outbreak has changed the direction of the country's economy, with the deteriorating external environment and weakening domestic demand," said ADB Director for Indonesia, Winfried Wicklein.
"If decisive action can be effectively implemented to overcome the health and economic impacts of the outbreak, especially to protect the poor and vulnerable, the Indonesian economy is expected to gradually return to its growth path next year."
According to the 2020 Asian Development Outlook (ADO), the COVID-19 pandemic along with falling commodity prices and financial market turmoil will have bad implications for the world economy and Indonesia this year, especially with the deteriorating economy of many Indonesia's major trading partners.
"Domestic demand is expected to weaken in line with declining business and consumer sentiment. However, in line with the recovery of the world economy next year, Indonesia's growth is expected to gain momentum, helped by reforms in the investment sector issued recently," he added.
Inflation, which averaged 2.8% last year, is expected to edge up to 3.0% in 2020, before falling again to 2.8% in 2021. Inflationary pressures from the tight food supply and currency depreciation are expected to be partially offset by the reduction in the price of non-subsidized fuel, as well as additional subsidies for electricity and food.
Meanwhile, export revenues from tourism and commodities are expected to decline, causing the current account deficit to reach 2.9% of the gross domestic product in 2020. As the export and investment levels recover in 2021, a greater volume of imported capital goods will cause a deficit current account remains the same as in 2020.
The government and financial authorities have launched coordinated and targeted fiscal and monetary measures to mitigate the impact of the COVID-19 pandemic on the economy and people's livelihoods. This includes the distribution of cash transfers directly to the poor and vulnerable groups, as well as tax cuts and lenient payment of loans for workers and businesses.
Externally, the risks to the projection of the Indonesian economy are a prolonged COVID-19 outbreak, further decline in commodity prices, and increasing financial market turmoil.
"From within the country, this projection depends on how quickly and effectively the outbreak can be addressed. Health system limitations and difficulties in implementing social restrictions can exacerbate the impact of the pandemic on the economy," he concluded.
ADB is committed to achieving a prosperous, inclusive, resilient and sustainable Asia and Pacific, and continues its efforts to eradicate extreme poverty. Founded in 1966, ADB is owned by 68 members — 49 of them in the Asia and Pacific region.