Bank Indonesia said the country’s economic growth could still soar to 5.4 percent despite the ongoing spread of the coronavirus disease 2019 (COVID-19), which is feared to dampen economic activity around the world.
The central bank recently cut its economic growth projection for this year to the range of 5 to 5.4 percent from its earlier projection of between 5.1 and 5.5 percent. Indonesia’s gross domestic product (GDP) grew 5.02 percent in 2019, the weakest in four years, as exports and investment cooled.
“The spread of COVID-19 does have an impact, but the central bank is optimistic that this year's economy can grow by up to 5.4 percent,” said Bank Indonesia Economic and Monetary Policy Department director IGP Wira Kusuma on Saturday.
He went on to say that Bank Indonesia’s move to lower its benchmark interest rate by 25 basis points to 4.75 percent was one of the ways it can reach the economic growth target.
Finance Minister Sri Mulyani Indrawati has previously said that Indonesia’s economic growth may be adversely affected by the global coronavirus outbreak in China, with a drop of 1 percentage point in China’s economic growth resulting in a drop of 0.3 to 0.6 percentage points in Indonesia’s economic growth.
Wira said the government should optimize state budget allocations and conduct structural reforms to support growth through fiscal policy.
“We are talking about hard and soft structural reforms,” he said. “In soft structural reforms, the government is drafting the omnibus law, and if it works well, it will increase investment.”
Wira also said that the virus spread had impacted the country’s economy, especially since China contributed at least US$2.38 billion foreign exchange in the country with a market share of 14.1 percent of the country's total foreign exchange.
"We know that China is one of our main trading partners, not to mention [the fact that it is] the biggest contributor to tourism," he concluded.
Indonesia welcomes some 2 million Chinese tourists annually, but Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan has said that the outbreak has affected Indonesian tourism, with estimated losses of around $500 million.
First detected in the Chinese city of Wuhan in late December, the pneumonia-like COVID-19 disease has since killed more than 3,000 people around the world and infected more than 80,000 people in over 60 countries.