Indrawati forecasts COVID-19 pandemic to dampen economic growth

Indrawati forecasts COVID-19 pandemic to dampen economic growth

Finance Minister Sri Mulyani Indrawati. ANTARA/Dewa Wiguna/pri.

Household consumption is expected to experience a significant drop in the event of no outdoor activities being conducted
Jakarta (ANTARA) - Finance Minister Sri Mulyani Indrawati has projected a slowdown in Indonesia's economic growth to 2.3 percent, and in the worst-case scenario, it could contract by 0.4 percent owing to the COVID-19 pandemic.

"BI (the central bank), OJK (the Financial Services Authority), and we (the Finance Ministry) have forecast the economic growth to decline to 2.3 percent, and in the worst-case scenario, it can contract by 0.4 percent," Indrawati stated here on Wednesday.

The coronavirus outbreak has slowed down economic activities, including financial institutions. Hence, it can potentially curb economic growth to fall below the 2020 target of 5.3 percent.

"This situation has caused a decline in economic activities and applied pressure on financial institutions owing to failure in loan payment or loan relaxation," she remarked.

Furthermore, she noted that it would cause household consumption to drop, from the targeted five percent set in the 2020 state budget to 3.22 percent, or in its worst-case scenario, to 1.6 percent.

"Household consumption is expected to experience a significant drop in the event of no outdoor activities being conducted," the minister remarked.

Consumption of non-profit institutions serving households (LNPRT) is expected to contract by 1.78 percent to minus 1.91 percent in the worst-case scenario.

Government consumption is projected to grow in the range of 3.73 percent to 6.83 percent, with its target set at 4.3 percent in the 2020 state budget.

"Government consumption can be maintained. Hence, the deficit will increase," she stated.

On the other hand, investment is expected to drop sharply, from the targeted six percent, to 1.12 percent or in its worst-case scenario, it could plummet to minus 4.22 percent.

Export growth, targeted at 3.7 percent, is projected to contract by 14 percent to 15.6 percent.

Imports are expected to register negative growth to lie between minus 14.5 to minus 16.65 percent, while the target was set at 3.2 percent in 2020.

"The transmission of this virus has snowballed into a social and economic problem, and it could further pose a real threat to financial stability," Indrawati cautioned.

Related news: Economic stimulus, social safety get priority as slowdown looms Related news: Indonesian Government insists lockdown not an option yet

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