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View all search resultsNavigating the economy amid the raging Delta variant
Pandemic containment is the key to spurring economic recovery and resuming normal activities, and requires concomitant efforts by both the government and the people.
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I
ndonesia Statistics (BPS) released on Aug. 5 the country's economic indicators for the second quarter of 2021, which saw the economy grow 7.07 percent year-on-year (yoy), a dramatic change from the first-quarter contraction of minus 0.71 percent. In addition, Bank Indonesia data showed that the inflation rate averaged 1.48 percent in the second quarter of the year, up from 1.43 percent in the first quarter.
The economic growth and the increase in the inflation rate confirm that Indonesia's economy was on a remarkable recovery path in the first semester of 2021.
Other essential outcome indicators also underscored Indonesia's substantial progress. The open unemployment rate declined from 7 percent in August 2020 to 6.02 percent in February 2021. The poverty rate dropped from 10.19 percent in September 2020 to 10.14 percent in March 2021, and over the same period, the Gini ratio measuring income inequality dipped from 0.385 to 0.384. At the village level, the Gini ratio stood at 0.317, better than the pre-pandemic level of 0.320 in March 2020.
The combination of a decline in income inequality and a low inflation rate indicates that Indonesia’s countercyclical fiscal policy was effective in supporting and stimulating the economy amid the pandemic. The government’s budget refocusing and timely tax relief worked well to make this positive outcome happen.
Such progress was seen not only from empirical data but also survey findings. A survey commissioned by Japanese firms in Asia and Oceania and conducted by the Japan External Trade Organization (JETRO) in late 2020 found potential rises in 2021business profit in Indonesia. This expectation influenced companies to increase, or at least maintain, their investments in Indonesia, with the three most attractive sectors being trade, automotive and iron and steel.
The two strongest reasons for investors to stay were Indonesia’s market size and its high economic growth potential in 2021. Aside from fellow ASEAN states Vietnam and Thailand, Indonesia was predicted to record high export value in 2021.
From the perspective of long-term investments, Indonesia was classified as a “fascinating” destination country after China and Thailand. As for investing in digital economies, Indonesia was categorized along with Singapore and Vietnam as the most promising markets. Indonesia also followed South Korea as the most probable countries to achieve significant recovery in the second quarter of 2021.
