Adrian Wail Akhlas and Esther Samboh, Jakarta – The government is working to finalize eight measures that will be incorporated in a second stimulus package aimed at easing rules for exports and imports as supply chains continue to be disrupted by the spread of COVID-19, Coordinating Economic Minister Airlangga Hartarto said on Wednesday.
The stimulus, he said, would be bigger than the first one.
"Trade easing will be expanded to keep the momentum of boosting exports," Airlangga said in Jakarta. "We are also working to relax the income tax and import duty to boost production."
The measure follows the unveiling of a Rp 10.3 trillion (US$725 million) stimulus package last week to support consumer spending and tourism.
Airlangga said the second stimulus package would be worth more than Rp 10 trillion, adding that the government would announce the new stimulus package soon to help support trade. "Several export-import licenses will be removed given the current circumstances."
Finance Minister Sri Mulyani Indrawati said in Jakarta on Monday that the government would ease import requirements of raw materials for local manufacturers as the disruption of the supply chain from China due to COVID-19 had begun to affect the country's manufacturing sector.
The secretary of the coordinating economic minister, Susiwijono Moegiarso, said in Jakarta on Tuesday that the new stimulus package would ease procedures to import raw materials from countries outside China and procedures to export wood-related products.
Earlier on Wednesday, President Joko "Jokowi" Widodo called on government officials to respond to the global dynamics, asking officials to relax import procedures.
"Supply from China has been disrupted and thus we need to relax [procedures]. If not, prices will skyrocket and this will drive inflation," Jokowi said.
"It is all the same for exports as we need to supply other countries," he said. "Procedures must be relaxed and simplified. But first we need to pay attention to sufficiency of raw materials."
Bank Indonesia projected weakening economic activities in tourism, exports and imports to drag down the country's economic growth to 4.9 percent in the first quarter before picking up in subsequent quarters.
BI Governor Perry Warjiyo said COVID-19 had hurt businesses engaged in trade as well as tourism-related industries in February, which would likely continue but bottom out in March.
"Recovery is likely to take place in the next six months after bottoming out in February and March," Perry briefed media leaders at the central bank in Jakarta.
Fitch Ratings director of sovereign ratings Thomas Rookmaaker said the outbreak could cause a short-term deterioration of revenue performance through its effects on economic activity.
"The self-imposed fiscal deficit ceiling of 3 percent of GDP would limit the government's capacity to materially relax fiscal policy," Rookmaaker told The Jakarta Post over email interview.
Rookmaaker said that any deterioration in fiscal metrics as a result of the virus would likely be short-lived. "We forecast a fiscal deficit of 2.2 percent of GDP in 2020 and expect the debt-to-GDP ratio to rise only marginally in the next few years."