Adrian Wail Akhlas, Jakarta – The Finance Ministry's fiscal policy agency (BKF) has voiced concerns that the government's Rp 436.1 trillion (US$28.14 billion) stimulus may be insufficient to prevent economic meltdown caused by the COVID-19 pandemic.
BKF head Febrio Nathan Kacaribu said on Monday that the government was considering whether to boost its stimulus spending as the existing stimulus packages may not be enough to counter the severe economic impacts of the pandemic.
"We have doubts that the stimulus packages will be enough," Febrio told reporters during a teleconferenced press briefing. "The government will anticipate this because there are some discouraging signs."
The government's baseline scenario is for economic growth to reach 2.3 percent this year with 2.9 million people losing their jobs. Under a worst-case scenario, however, the government believes the economy could contract by 0.4 percent while 5 million people lose their jobs.
"With this kind of crisis, the government must share the burden," said Febrio, who was previously macroeconomy and trade research head at the University of Indonesia's Institute for Economic and Social Research (LPEM-UI) before his BKF appointment early this month.
He called on banks and businesses to take aggressive action by rolling out funds to combat the meltdown.
The government expects the pandemic to peak in the second quarter of this year, with economic growth contracting. Meanwhile, first quarter gross domestic product (GDP) growth is projected at 1.1 percent, he added.
"This projection may be wrong if the pandemic lasts longer," Febrio said. "We will try to contain the virus and lessen the impact but the burden must be shared because the government will not be able to do this alone."
The government has set aside Rp 436.1 trillion for the stimulus, equivalent to 2.5 percent of the country's GDP, for healthcare spending, social safety nets and business recovery programs so far focusing on manufacturing and tourism.
The government will set aside Rp 150 trillion from the stimulus package to support small and medium firms affected by the COVID-19. Febrio did not provide further details as the government was currently formulating the stimulus.
The government will also grant larger tax breaks to cover 11 business sectors similar to the incentives designed to allow manufacturing companies to weather the economic impact of the COVID-19 pandemic, including individual income tax exemptions, import tax deferrals and 30 percent corporate tax discounts.
The 11 sectors are food, trade, electricity, oil and gas, mining and coal, forestry, tourism and the creative economy, telecommunications, logistics, transportation and construction, Finance Minister Sri Mulyani Indrawati said on Friday.
"From an economic standpoint, the COVID-19 shock could damage businesses and cause widespread bankruptcies," Sri Mulyani said. "We are trying to focus our stimulus to lessen the COVID-19 economic shock on citizens."
Meanwhile, chief economist at private lender Bank Central Asia (BCA) David Sumual said the government's stimulus package was relatively small compared with other countries including neighboring Singapore and Malaysia, with stimulus packages reaching 12 percent and 17 percent of GDP, respectively.
"We are hoping that the government can provide greater stimulus packages for small businesses and low-income households," David told reporters during the same press briefing. "However, the government's stimulus needs to be welcomed despite limited fiscal power."