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BI expects muted inflation, looks to ‘nudge demand, growth’
Following the emergency restrictions imposed on July 3 to rein in the "second wave" of COVID-19, Bank Indonesia lowered its economic growth forecast but maintained its view that inflation would remain mild.
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People leave the Bank Indonesia headquarters in Central Jakarta on Feb. 26, 2020, around a month before the government declared COVID-19 a "public health emergency". (JP/Dhoni Setiawan)
B
ank Indonesia (BI) has lowered its economic growth forecast for this year to 3.8 percent, maintaining its expectation for tame inflation following the introduction of COVID-19 mobility restrictions.
The central bank’s previous GDP growth projection for this year was between 4.1 and 5.1 percent with a median estimate of 4.6 percent, as the country was poised for a rebound before the second wave of COVID-19 and the attendant emergency public activity restrictions (PPKM Darurat).
“Our initial assessment shows that, if the PPKM Darurat lasts for a month and is able to curb COVID-19, economic growth will fall to around 3.8 percent,” BI Governor Perry Warjiyo told a House of Representatives hearing on Monday.
The central bank’s downward revision comes after a similar move earlier this month by the government, which revised down its economic growth forecast to between 3.7 and 4.5 percent from 4.5 to 5.3 percent.
The government and BI slashed their GDP growth forecasts as the emergency restrictions were enforced from July 3 to 20 across Java and Bali. The tighter restrictions were also applied to several other regions that recorded an increase in infections, supply and capacity shortages at hospitals and met other parameters in recent days.
Read also: GDP growth forecast slashed to 3.7-4.5% as pandemic worsens
Indonesia’s GDP growth showed signs of recovery in the first quarter, when the annual rate of contraction slowed to 0.74 percent, less than in the preceding quarters.
