The Jakarta Post
The government is pinning its hopes on a growth rate of around zero percent this year as it struggles to spend a Rp 695.2 trillion (US$47 billion) stimulus budget to revive an economy reeling from the coronavirus pandemic.
Finance Minister Sri Mulyani Indrawati said on Wednesday that economic growth could flatline at zero percent this year as economic activity might start to normalize by September, adding that the government was struggling to spend the stimulus budget needed to revive the economy.
“An economic recovery doesn't mean a jump from minus 5 percent to 5 percent growth, we may be close to zero [growth] because catching up with last year’s level is a struggle amid the COVID-19 pandemic,” she said during the webinar “Reimagining the future of Indonesia’s economy”, which is part of The Jakarta Post’s Jakpost Up Close webinar series.
Sri Mulyani referred to the coronavirus outbreak that has caused the country’s economy to shrink 5.32 percent in the second quarter this year, as the components of economic activity fell significantly.
“The President has asked whether the money should be poured out to the people or through the economy, and pouring it out isn’t just like flushing it down the toilet. You really have to spend and somebody is going to audit you,” she said.
So far, the lack of stimulus budget disbursement has continued to hinder Indonesia’s economic recovery. The government has only spent around 21 percent, Rp 151 trillion, of the stimulus budget even after five months since the beginning of the outbreak.
The finance minister said a lack of citizens’ data and red tape were among the main reasons that held up budget disbursement, adding that the government had to “redesign and reshape” the stimulus to be able to speed up spending.
“Several ministers are also still new and have yet to understand the bureaucracy as the COVID-19 pandemic has hit their funding needs hard, which they must reprioritize and cut their budgets,” she went on to say.
Sri Mulyani added that the trajectory of the economy would depend on whether a second wave of the virus hit the country later this year, adding that the government hoped for a “technical rebound” next year as economic activity normalized.
The government expects the economy to grow by 4.5 to 5.5 percent next year, but several economists have said the uncertainty surrounding the coronavirus may again stymie the country’s economic growth.
“Macroeconomic policy will be prudent and supportive next year and some reforms including the omnibus bills will provide confidence,” she said.
The government will continue to accelerate infrastructure development, incentives for businesses and social protection programs, among other projects.
“We are hopeful this can create confidence for the business community and consumers,” she added.