Corona Makes the Rate of Indonesia's Economic Growth Increasingly Severe

TRIBUNBATAM.id - The covid-19 effect hit domestic market conditions this week.

Efforts to score higher economic growth have become even more challenging in 2020.

The rupiah exchange rate plummeted to above Rp 14,300 per US dollar on the spot market and the stock index experienced a correction to the level of Rp 5,400 this weekend, Friday (02/28/2020).

The government has poured fiscal stimulus to fend off potential for correction of economic growth which is predicted to reach 0.3 percent. This means that on the basis of 5.02 percent growth last year, economic growth this year could decline to 4.7 percent.  

An Economist, Samuel Sekuritas Ahmad Mikail Zaini calculated, the potential for correction of economic growth experienced by Indonesia could be even greater.

Every 1 percent of the decline in the Chinese economy impacts on the decline of the Indonesian economy by 0.58 percent. 

"If the first quarter of China could only grow 5.1 percent, then Indonesia's economic growth could be only 4.5 percent," said Mikail, Friday (2/28/2020).

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With global sentiment that so heavy, Mikail said there was little hope for the economy to grow to achieve an ambitious government target of 5.3 percent. 

In terms of household consumption, the growth at this year is estimated to only be around 4.8-4.9 percent. 

"Food inflation is still and will be higher, especially, now, supplies from China are hampered," he said.

Government spending, on the other hand, also cannot be expected. Therefore, the prospect of tax revenue at this year could be worse than last year if economic activity weakens due to Corona. 

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Meanwhile, from the investment side, there is hope that the Omnibus Law Cipta Kerja initiative from the government can be truly effective so as to encourage the growth of foreign direct investment (FDI) in the country to double-digit increase.

But if it is not, Mikail projects that investment expenditure growth will only be in the range of 3.8 percent along with sluggish credit growth. 

Net exports, Mikail continued, are predicted to contract again by around -2 percent in line with the prospect of widening the trade balance deficit.

"In full-year terms, we project Indonesia's economic growth this year to be at the level of 4.85 percent. However, if Omnibus Law is not implemented, the growth projection can be even lower at 4.6-4.7 percent," said Mikail. (*) 

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