There are strong indications the nation is currently in a transitional period and moving toward better economic performance thanks to right policy measures after being battered by the COVID-19 pandemic, according to the Indonesian government.
The government has put precautionary measures in place since the early stages of the coronavirus outbreak and has focused on balancing COVID-19 handling and economic recovery efforts.
Indications of economic improvement have begun to emerge. Indonesia’s economic growth improved from minus 5.32 percent in the second quarter of 2020 to minus 3.49 percent in the third quarter, and further, to minus 2.19 percent in the fourth quarter of the year.
Indonesia's economy shrank by 2.07 percent year-on-year (yoy) in 2020, a figure that is considered better than several other countries, according to observers.
Coordinating Minister for Economic Affairs, Airlangga Hartarto, is optimistic the Indonesian economy will recover to 1.3 to 1.8 percent growth in the first quarter of 2021. To reach the target, the government is making efforts to boost public consumption.
For instance, it has raised the budget for the National Economic Recovery program to Rp553.09 trillion (US$39.4 billion).
“In the plenary cabinet meeting and in other meetings, we’ve decided the size to be Rp553.09 trillion. It means the government sees that economic recovery in 2021 needs a similar support as seen in 2020,” Hartarto told a business forum.
The Indonesian economy is projected to accelerate well in 2022, with this year's transition momentum.
"(Countries in) Southeast Asia, such as the Philippines and Singapore, and in (other parts of) the world, such as Italy, France, Germany, and the US, (have) also recorded negative (growth). We should be proud. Although we cannot speak about the future being the best, but we are at a point that is definitely much better now," State-Owned Enterprises (SOEs) Minister Erick Thohir said recently.
To allow faster economic recovery next year, the government will continue to focus on overcoming the COVID-19 pandemic, which has emerged as a major crisis, he said.
If coronavirus transmission can be handled effectively, the Indonesian economy would be able to work, move, and grow better, the minister emphasized.
Thohir assured that SOEs would continue to be at the forefront of the fight against the impact of the pandemic.
Indonesia's SOEs are not only working commercially, but also offering public services, such as ensuring the number of beds are sufficient to meet the needs of COVID-19 patients and converting Jakarta's Athletes' Village into an emergency hospital for COVID-19 handling, the minister pointed out.
Moreover, SOEs are playing an active role in developing Indonesia's indigenous COVID-19 vaccine -- the Red and White vaccine -- as the nation does not intend to rely on expensive imported vaccines, he said.
Meanwhile, Kunta Wibawa Dasa Nugraha, expert staff in charge of state expenditure affairs at the Ministry of Finance, said Indonesia's 2020 economic growth at minus 2.07 percent (yoy) was above the global average.
"Although it's a minus, but the world level was minus 3.5 percent; it means we were much better than the world average. There were even countries with a minus (contraction) far above 3.5 percent," he said during a webinar on ‘Acceleration of Social Economy’, held on February 7, 2021.
Further, Trade Minister Muhammad Lutfi highlighted his ministry’s efforts to step up non-oil and gas exports by optimizing international trade agreements to bolster Indonesia's economy.
The nation’s existing international trade agreements include the Regional Comprehensive Economic Partnership (RCEP), Indonesia-Korea Comprehensive Economic Partnership Agreement (IKCEPA), Indonesia-Pakistan Preferential Trade Agreement (IP-PTA), and Indonesia-Australia Comprehensive Partnership Economic Agreement (IA-CEPA).
"To achieve the non-oil and gas export growth target, we must open up the Indonesian market and collaborate with various countries through existing trade agreements. This is also an effort to increase the added value of each exported product," Lutfi said while, speaking at the 2021 National Seminar on the Indonesia Economic Outlook (IEO), organized by the Indonesian Economic and Development Study (Canopy), Faculty of Economics and Business (FEB), University of Indonesia, recently.
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Indonesia's trade balance in 2020 posted a surplus of US$21.7 billion, the highest level since 2012, he said. However, the large surplus was owing to a sharp decline in imports, he added.
Exports in 2020 dipped by just 2.6 percent year-on-year (yoy), while imports plunged sharply by 17.3 percent yoy.
Lutfi pointed out that the countries contributing to Indonesia's trade balance surplus were the United States (US$11.13 billion surplus); India (US$6.47 billion); and, the Philippines (US$5.26 billion).
The top five export products clocking the highest positive growth (yoy) during the 2019-2020 period were steel at 46.84 percent; jewelry (24.21 percent); crude palm oil (CPO) (17.5 percent); furniture (11.64 percent); and, footwear (8.97 percent).
In the meantime, Bank Indonesia (BI) Governor Perry Warjiyo has opined that the realization of recovery and economic growth will rely on the speed at which government policies are implemented to handle the impact of the COVID-19 pandemic.
"It depends on how fast the various policies are implemented. The more effective it is, the higher it (growth) will be above five percent," the BI Governor remarked.
Warjiyo said he is optimistic that national economic recovery would be achieved through several sources: exports, fiscal, consumption, and investment.
Exports, which were pegged at US$16.5 billion last year, an increase of 14.6 percent from a year ago, were the highest since 2013 owing to a rise in demand, especially from China, the ASEAN countries, and the US, he observed.
Foreign investment inflows to Indonesia are expected to continue to increase and reach US$19.1 billion in 2021 from US$11 billion in 2020, he pointed out.
Warjiyo noted that consumption has begun to increase, albeit not as quickly as the government estimates, since it is highly dependent on social assistance and mobility.
Indonesia's economic improvement this year will also be supported by macroeconomic and financial system stability, he said.
The BI Governor urged the government, society, and authorities to remain optimistic about the outlook for the national economy this year despite a lingering pandemic. (INE)
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