Will Indonesia’s Economy Grow or Decline?

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Econolodgestocktonca.com – Deputy Chairman of the Indonesian Chamber of Commerce and Industry Advisory Board, Gita Wirjawan, predicts the country’s economic growth will be corrected to reach a negative 6 percent in the second quarter of 2020. The slow progress of the stimulus handling of Covid-19 will be the trigger.

Through an official statement on Saturday (7/4), he stated that there would be a contraction of economic growth between negative 4 to negative 6 percent in the second quarter of 2020.

Absorption in various fields includes new health 1,65 percent, social protection 28,63 percent, business incentives 6,8 percent, MSME 0,06 percent, corporations 0 percent, and sectoral 3,65 percent. This will put the pressure on health recovery, social security, and economic networks more severe.

Wirjawan explained that the weak implementation of the stimulus would make the country’s economic growth contraction again in the third quarter at a negative growth level. Technically, Indonesia is entering a phase of economic recession.

Also Read: Coronavirus And Its Effect On Global Economy

From the trade point of view, the surplus achieved in both April and May 2020 was due to a decline in imports, which was higher than the decrease in exports. Considering the significant role of the auxiliary material group around 70 percent of total imports by the end of May 2020, it is estimated that domestic production for the benefit of domestic consumption and exports will continue to be affected for quite some time.

From the investment point of view, the decline in foreign investment realization is expected to decline more in the second quarter of the year, compared to the negative 9,2 percent in the first quarter while the momentum of the increase in domestic investment realization cannot be expected given the low credit growth of around 2,68 percent as of May 2020.

Will New Normal Help The Economy?

Everything is uncertain when it’s related to Covid-19. However, Wirjawan believes that there would be some economic changes on a global scale.

First, economic growth is slowing down due to the decrease in purchasing power or aggregate demand. Second, the decline in productivity is due to the disruption of the supply chain. Third, the increase in debt caused by the increasing liquidity requirements for economic recovery.

Fourth, business models that embrace the non-communal or digital paradigm. Fifth, the increase in the divergence between the capital market and the real economy is supported by the increasing number of money printing by several developed countries. Sixth, increasing protectionism or aspirations of each country to become part of the supply chain deglobalization and also to increase their competitiveness.

The last one, the geopolitical deglobalization marked by increased polarization between China and the US with countries that want to be affiliated with or utilize one of the two superpowers.

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