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Jakarta Post

Indonesian government prepares for worst, including zero percent growth, as COVID-19 hits

  • Marchio Irfan Gorbiano and Made Anthony Iswara

    The Jakarta Post

Jakarta   /   Fri, March 20, 2020   /   05:33 pm
Indonesian government prepares for worst, including zero percent growth, as COVID-19 hits Finance Minister Sri Mulyani Indrawati delivers remarks after the signing of a memorandum of understanding and cooperation agreement at the Office of the Coordinating Economic Minister in Jakarta on Feb. 13. (Antara/M Risyal Hidayat)

The government has prepared a few scenarios on how Indonesia's economic growth will end up as COVID-19 begins to hit the country’s economy.

Finance Minister Sri Mulyani Indrawati said Friday that her ministry had taken into account restricted movement and potential lockdown measures to prepare the government in facing the situation.

In the event of disrupted international trade, weakened household spending, layoffs and drop in crude price, the ministry projected that the country’s economic growth would still be able to reach above 4 percent this year.

Read also: $3.9 billion state spending reallocated for COVID-19 response: Sri Mulyani

“However, if the problems worsen, the COVID-19 outbreak lasts more than six months, international trade falls by 30 percent and the aviation industry faces a shock [drop] of 75 percent, economic growth could reach as low as 2.5 percent or even zero percent,” Sri Mulyani said after a limited Cabinet meeting.

“We hope there will be vaccine and antiviral [for the disease]. If the finding can be done quickly, the [economic] impacts will surely be shorter,” she added.

Indonesia’s economy grew 5.02 percent last year, slower than 5.17 percent recorded in 2018 as investment and exports cooled. Sri Mulyani on Wednesday projected that the country’s gross domestic product (GDP) growth would weaken to between 4.5 percent and 4.9 percent in the first quarter, with a possibility of plunging further in the second quarter as economic activity weakened due to the novel coronavirus outbreak.

Indonesia’s GDP expanded 4.97 percent in last year’s fourth quarter, the lowest since 2016.

Despite a rapid increase in confirmed cases and fatality numbers, President Joko “Jokowi” Widodo ruled out on Thursday the possibility of imposing a lockdown in the country. He, instead, ordered mass testing and advocated social distancing to contain the virus spread.

Read also: Jokowi urges ministers to focus budget on health care, social aid, economic stimuli

Sri Mulyani said the President had ordered the ministry to prepare possible scenarios and measures for every level of the economic growth projections.

“We wish that [zero percent growth] won’t happen. That is why measures for a safety net and the business sector have to be implemented,” she said. “This is our main focus together with the coordinating economic minister and Financial Services Authority officials.”