Covid-19; ADB Projects Indonesia Economic Growth at 2.5%

TEMPO.CO, Jakarta - The Asian Development Bank (ADB) estimates that the Indonesian economy will grow 2.5 percent in 2020 due to the outbreak of the Coronavirus alias COVID-19. The figure represents a 50-percent decline compared to 2019's growth rate or 5.0 percent.

"Although Indonesia has a strong macroeconomic foundation, the Covid-19 pandemic has changed the direction of the country's economy, with worsening external situations and weakening domestic demand," ADB director for Indonesia Winfried Wicklein said in a written statement, Friday, April 3.

Winfred estimates that the Indonesian economy can gradually return to its growth track in 2021, if the government effectively takes decisive actions to address the health and economic impacts of the Coronavirus outbreak.

According to the Asian Development Outlook 2020, the Covid-19 pandemic that comes with falling commodity prices and financial market turmoil will have bad implications for the Indonesian economy, as well as the world's. The situation is exacerbated by the weakening economies of several trade partners of Indonesia.

Meanwhile, domestic demand is expected to weaken along with negative sentiments from the business and consumer sectors. However, as the world's economy will recover next year, Indonesia's growth is expected to gain momentum, with support of investment reform policies that he government recently issued. 

This year's inflation is estimated at 3.0 percent, up from last year's 2.8 percent. Declining revenues from tourism exports and commodities are expected to result in a CAD 2.9 percent of the GDP in 2020. When exports and investment recovers in 2021, a larger volume of imported capital goods will cause the current account deficit to remain the same as in 2020.

ADB said that the Indonesian government  and financial authorities have issued coordinated and appropriate fiscal and monetary policies to mitigate the economic risks this pandemic has on public income. Among these efforts are direct and indirect welfare assistance; tax cuts, as well as loan deferment.

Externally, Winfried said, Indonesia still faces the risk of a very long pandemic, further decline in commodity prices, and increasing financial market turmoil.

Domestically, this projection depends on how quickly and effective the outbreak can be contained. Health system limitations and difficulties in applying social restrictions can worsen the impact of this pandemic on the economy.

Caesar Akbar