Jakarta – Indonesia's economic situation is expected to improve soon, as the government is preparing a number of recovery plans, Coordinating Economic Minister Airlangga Hartanto has said.
During a virtual discussion entitled "Outlook 2021: Wajah Indonesia Setelah Pandemi" (How Indonesia will look after the pandemic) on Thursday, Airlangga said he believed that the nation's economy had started to pick up.
"The signs are already here. The [COVID-19] vaccine's arrival will increase the public's confidence and sense of security, which should lead them to restarting their activities. The economy is closely related to [people's] mobility," he added.
The minister claimed that Indonesia even managed to control the economic impact of the pandemic better than other G20 members.
Indonesia recorded a gross domestic product (GDP) drop of 3.5 percent year-on-year (yoy) in the July-September period that sent the country into its first recession since the 1998 Asian financial crisis. The contraction however was less severe than the 5.3 percent yoy decline seen in the second quarter.
Despite the economic optimism, Airlangga assured the public that the government would prioritize health care, saying that it had allocated a large portion of the 2021 state budget for the nation's health sector, including the national vaccination drive.
"The government has allocated between Rp 63 trillion [US$4.4 billion] and Rp 73 trillion to support the vaccination program," he said.
In order to improve the economic situation, the government has also launched social protection programs to boost people's purchasing power. Airlangga explained the government had allocated Rp 48.8 trillion to assist the small enterprise sector in 2021.
Meanwhile, Finance Minister Sri Mulyani Indrawati said last week that the government projected a GDP contraction of between 1.7 and 2.2 percent this year driven by shrinking household spending, which accounts for more than half of Indonesia's GDP.
This figure was lower than the ministry's previous forecast in September, in which the government predicted an economic contraction of 0.6 to 1.7 percent.
"We expect household spending to contract by around 2.6 to 3.6 percent due to rising COVID-19 cases in December that triggered tighter restrictions," Sri Mulyani said during a Dec. 21 virtual press briefing.
The Asian Development Bank (ADB) and World Bank have also lowered their projections for Indonesia's economy in 2020. Both institutions expect Indonesia's economy to contract by 2.2 percent this year, as opposed to previous forecasts of a GDP contraction of 1 and 1.6 percent, respectively.
Sri Mulyani went on to say that she also expected investment, which serves as one of the major contributors to Indonesia's GDP, to contract this year. "We expect investment to shrink at about 4.4 to 4.5 percent in 2020," she said.
However, she believes that the contraction of investment in the fourth quarter will improve to around 4 to 4.3 percent, from the negative 6.5 percent recorded in the third quarter, following increasing sales of commercial vehicles as well as capital goods imports. (dpk)