5.4% economic growth despite COVID-19: Bank Indonesia

Indonesia’s central bank is confident that the country’s economic growth could still rise to 5.4 percent despite the ongoing COVID-19 outbreak.

Recently, Bank Indonesia slashed its economic growth forecast for this year to the range of 5.0 to 5.4 percent from its earlier projection of between 5.1 and 5.5 percent. 

At 5.02 percent, Indonesia’s gross domestic product (GDP) in 2019 is the weakest in four years for the largest economy in Southeast Asia, due to slowing exports and investment.

While acknowledging that the spread of COVID-19 does have an impact, Bank Indonesia Economic and Monetary Policy Department director IGP Wira Kusuma is optimistic that this year’s economy can grow by up to 5.4 percent.

He went on to say that Bank Indonesia’s move to cut its benchmark interest rate by 25 basis points to 4.75 percent was one of the ways it can achieve the economic growth target.

Previously, Finance Minister Sri Mulyani Indrawati has said that Indonesia’s economic growth may be adversely affected by the global coronavirus outbreak in China. She projected that a drop of 1 percentage point in China’s economic growth would shave off 0.3 to 0.6 percentage points from Indonesia’s economic growth.

Wira advised the government to optimize state budget allocations and accelerate structural reforms to support growth through fiscal policy.

“We are talking about hard and soft structural reforms,” he said. “In soft structural reforms, the government is drafting the omnibus law, and if it works well, it will increase investment.”

Wira also said that the virus outbreak had impacted the Indonesian economy. The repercussions are particularly strong since China contributed at least US$2.38 billion foreign exchange in Indonesia with a market share of 14.1 percent of the latter’s total foreign exchange.

“We know that China is one of our main trading partners, not to mention [the fact that it is] the biggest contributor to tourism,” he concluded.

Every year, Indonesia welcomes about 2 million tourists from China. However, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan has said that the epidemic has hammered Indonesian tourism, with estimated losses of around US$500 million.

First detected in the Chinese city of Wuhan in late December, the pneumonia-like COVID-19 has since killed at least 3,050 people globally. The disease has infected almost 90,000 people in 68 countries and territories.


Jakarta. Picture credit: Fuzz from Pixabay