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IMF lowers Indonesia’s GDP growth outlook for 2021
The International Monetary Fund's latest outlook for Indonesia forecasts GDP growth of 4.3 percent this year, lower than the government's targeted range of between 4.5 percent and 5.3 percent.
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he International Monetary Fund (IMF) has lowered its 2021 growth projection for Indonesia and is far less optimistic than the government about the economic recovery as the country faces setbacks with its COVID-19 vaccination program.
In its April outlook, the IMF downgraded Indonesia’s gross domestic product (GDP) growth projection by 0.5 percentage points to 4.3 percent for this year. That figure is lower than the government’s projection, which assumes GDP growth between 4.5 percent and 5.3 percent.
Josua Pardede, an economist at publicly-listed Bank Permata, said the IMF’s downgraded outlook was in line with the country’s slow vaccination rollout compared to other emerging economies, like India and Turkey.
“With the slow distribution of vaccines, economic activities in the majority of sectors cannot return to normal, which depresses employment rates and keeps people’s purchasing power low,” Josua told The Jakarta Post via text message on Friday.
Around 9.7 million Indonesians have received their first jab and 4.9 million have been fully vaccinated against the virus as of Friday, according to Health Ministry data. But Indonesia is also facing shipment delays and uncertainty over millions of AstraZeneca doses.
Read also: Indonesian government promises big, then falters in vaccine procurement
The IMF is the only multilateral economic organization so far to downgrade its Indonesia GDP growth outlook for this year.
Previously, the World Bank held its GDP growth projection for Indonesia at 4.4 percent for 2021, while the Organization for Economic Cooperation and Development (OECD) raised its projection by 0.9 percentage points to 4.9 percent.
These organizations’ outlooks not only reflected Indonesia’s vaccination progress but also Indonesia’s GDP contraction of 2.19 percent year-on-year (yoy) in the fourth quarter of 2020, which was less severe than the previous quarters, according to Statistics Indonesia (BPS).
Read also: World Bank holds Indonesia’s GDP growth forecast for 2021
Finance Minister Sri Mulyani Indrawati said the IMF’s April projection, like any other projection, was subject to uncertainty and involved many assumptions, including a third wave of the pandemic.
“But we can only control the policy side, thus we will keep making adjustments,” Sri Mulyani said in a virtual event on Friday, adding the vaccination program was expected to be a game changer.
“We also need to safeguard businesses to keep them afloat or start recovering, and we also need to keep making structural reforms.”
In a bid to recover the economy, the government raised the COVID-19 stimulus budget to Rp 699.4 trillion (US$47.9 billion) for this year, which is 20.6 percent higher than last year.
Faisal Rachman, an economist at state-owned Bank Mandiri, said the IMF’s downward revision mainly reflected Indonesia’s high COVID-19 case number in the first quarter of the year.
But the renewed mobility restrictions, officially called public activity restrictions (PPKM), have lowered the number of daily new cases. The PPKM added pressure on the economy but was expected to build a solid foundation for growth starting in the second half, he said.
Bank Mandiri is marginally more optimistic than the IMF, as it expects Indonesia’s GDP to grow 4.43 percent this year.
“The growth figure is still below the pre-pandemic level, which averaged around 5 percent,” Faisal said in a note released on Wednesday. “Downside risk may arise if the front-loading economic stimulus, COVID-19 crisis management and vaccine rollout do not go as planned.”
