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Outlook 2021: Indonesian economy likely to rebound but risks loom
The government, the central bank and various international institutions have predicted that Southeast Asia’s largest economy will grow between 4.4 and 6.1 percent this year.
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A firefighter sprays disinfectant at Kramat Jati wholesale market in East Jakarta on June 22, 2020. Authorities continue to disinfect public places, including traditional markets, to break the chain of COVID-19 transmissions. (JP/P.J.Leo)
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ndonesia’s economy is likely to return to growth in 2021 as COVID-19 vaccines become available and monetary and fiscal stimulus measures are extended, but economists worry that coronavirus-related risks could still hamper the recovery.
The government, the central bank and various international institutions have predicted that Southeast Asia’s largest economy will grow between 4.4 and 6.1 percent this year, largely driven by an expected recovery in consumer spending after vaccines become widely available, commodity prices rise and monetary and fiscal stimulus packages take effect.
“Vaccination will play a key role in supporting economic growth in the second half of 2021 and will help boost household spending,” Bank Mandiri economist Faisal Rachman told The Jakarta Post in December. “Fiscal stimulus, accommodative monetary policy and higher growth in exports compared with imports will all support the economy [in 2021].”
Indonesia plunged into a recession for the first time in two decades last year as the coronavirus outbreak took a huge toll on economic activity, raised the country’s unemployment rate and exacerbated wealth inequality. The government estimates the economy shrank by 1.7 to 2.2 percent last year while Bank Indonesia (BI) believes the economy contracted 1 to 2 percent.
“Growth in 2021 is projected to rebound, partly driven by a base effect and assuming that consumer confidence improves and household income is supported by a stronger labor market and adequate social assistance,” the World Bank wrote in its “Indonesia Economic Prospect” report published on Dec. 17.
“Public health remains a top priority to allow the economy to stay open and to move towards a safe full reopening,” the report went on, noting that continued improvement in testing and contact tracing, as well as preparations to procure and widely administer effective vaccines, would be the keys to recovery.
Fiscal support
