Jakarta (ANTARA) - The Indonesian economy will grow just 2-4 percent in the second quarter of 2021 owing to the recent spike in COVID-19 cases, an economist has predicted.

Due to a sharp increase in positive cases and social-distancing measures, the economy has slowed in June this year, Center of Economic and Law Studies (Celios) director Bhima Yudhistira said here on Wednesday.



Second-quarter economic growth will fall short of the government-set target of 7 percent as the stringent micro-scale public activity restrictions (PPKM) have had a series of unfavorable impacts on the public and businesses, he said.



Amid the recent surge in COVID-19 cases and stringent micro-scale public activity restrictions, the public has become inclined to save and keep money in the bank, he noted.



The rise in infections has also had an impact on household consumption and public optimism, so the consumer confidence index will return to a level of below 100, he forecast.


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Consequently, manufacturing companies will adjust their production to low domestic demand and slash their production capacity, so the manufacturing Purchasing Managers’ Index (PMI) will potentially return to a level of below 50, he predicted.



Meanwhile, the tourism sector, including hotels, restaurants, and transportation, will likely continue to contract until the third quarter of 2021, he said.



The closure of large-scale retail businesses will continue so the number of companies applying for deferred debt repayments will increase and add to the bankruptcy list, he said.



Low and middle income people on the brink of poverty, whom the government has continued to support, will increasingly come under pressure, he noted.



This is because budget allocations for social protection will become smaller, while the realization of budget funds for national economic recovery will remain low, he predicted.



As of June 18, 2021, the realization of budget funds for national economic recovery reached Rp226.63 trillion, accounting for 32.4 percent of the ceiling of Rp699.43 trillion for this year. (INE)


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