Adrian Wail Akhlas, Jakarta – Fitch Solutions has downgraded Indonesia's economic growth projection to 2.8 percent, down from its initial projection of 4.2 percent, as consumption and investment growth are expected to slow amid weakening global economic expansion during the COVID-19 pandemic.
"While the government and the central bank have made aggressive moves to stimulate the economy, we believe that these efforts will not be enough to offset the devastating effects the COVID-19 pandemic will have on employment and public health," researchers at the Fitch Solutions country risk and industry research wrote in a research note dated April 17.
They projected Indonesia's private consumption to slow to 1.2 percent in 2020 from 5 percent in 2019 due to mounting unemployment.
As many as 2.8 million people have lost their jobs as of Monday last week, according to data from the Manpower Ministry and the Workers Social Security Agency (BPJS Ketenagakerjaan). More than half were furloughed and placed on paid or unpaid leave.
"We also expect capital formation to slow to just 1.5 percent in 2020 after posting a growth of 4.5 percent in 2019," Fitch said, adding that this would mainly be driven by severe delays that large scale infrastructure projects were likely to face amid the crisis.
The government expects the country's economy to grow 2.3 percent this year, which would be the lowest rate in 21 years, in a baseline scenario and even contract 0.4 percent in the worst-case scenario.
The International Monetary Fund (IMF) in its latest projection expected Indonesia's gross domestic product (GDP) growth to reach 0.5 percent this year while the global economy was projected to contract by 3 percent.