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Indonesia’s recovery still requires helping hand: IMF

The International Monetary Fund recommends that the government maintain some policy support while the economy is on the mend.

Dzulfiqar Fathur Rahman (The Jakarta Post)
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Fri, January 28, 2022 Published on Jan. 27, 2022 Published on 2022-01-27T17:02:30+07:00

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An aerial photo shows downtown Jakarta on the first day of 2022. The International Monetary Fund recommends that the government maintain some policy support while the economy is on the mend. An aerial photo shows downtown Jakarta on the first day of 2022. The International Monetary Fund recommends that the government maintain some policy support while the economy is on the mend. (AFP/Bay Ismoyo)

I

ndonesia may need to keep providing some policy support until the country’s recovery from the COVID-19 pandemic firms up, while gradually unwinding emergency spending to maintain stability and tackle downside risks, according to the International Monetary Fund.

The IMF forecast in its January outlook that Indonesia’s gross domestic product would grow by 5.6 percent this year and 6 percent next year.

Those growth forecasts, which mark downward revisions from figures stated in the IMF’s previous report for Indonesia, are based on the assumption of continued policy support in addition to favorable commodity prices, an ongoing vaccination campaign and the absence of severe mobility restrictions.

The government’s effort to accommodate elevated spending needs for health care and social protection while pursuing fiscal consolidation by phasing out some emergency spending was “appropriate,” said Cheng Hoon Lim, the Indonesian mission chief at the Asia-Pacific department of the IMF.

“With the recovery underway, gradually restoring the central tenets of the prepandemic macroeconomic policy frameworks will reinforce Indonesia’s strong policy track record,” Lim was quoted in a press release as saying on Tuesday.

However, the IMF team noted in a statement on its latest report for Indonesia that, “if severe downside risks—such as a slower recovery or a rapid resurgence of COVID-19 infections and related containment measures—were to materialize, longer-lasting pandemic support could become necessary.”

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