Indonesia Sees Solid Post-Pandemic Recovery in 2021

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Indonesia’s president said the economy will rebound next year and the fiscal deficit will narrow as the outlook improves from this year’s coronavirus pandemic.

The economy is forecast to grow 4.5%-5.5% next year, while the fiscal deficit is expected to narrow to 5.5% from this year’s 6.34%, President Joko Widodo said Friday in his annual budget speech in Jakarta. Spending is projected to rise to a record high of 2,747.5 trillion ($185.2 billion).

Southeast Asia’s largest economy is experiencing its worst crisis in more than two decades as restrictions on movement to fight the pandemic and a plunge in global demand have wreaked havoc on households and business. With government revenue falling, Jokowi, as the president is known, has had to turn to the central bank to help share the burden, and said he intends to do so next year too.

“The government is committed to delivering positive growth in 2021 and beyond by fiscal stimulus, and such counter-cyclical fiscal strategy is indeed appropriate,” said Enrico Tanuwidjaja, a Jakarta-based economist for United Overseas Bank Ltd. “The speed of implementation and disbursement on the ground of the real economy is key to achieve the growth target, and flexibility given to the fiscal deficit cap until 2022 will lend much-needed armor.”

Indonesia’s economy shrank 5.32% in the second quarter compared to a year earlier, its first contraction in more than two decades. The country is still grappling with a surge in infections since the partial lockdown was eased at the end of May. Indonesia has more than 130,000 confirmed cases of Covid-19 virus and almost 6,000 deaths, the second-highest caseload and highest death toll in East Asia.

— With assistance by Rieka Rahadiana, Tassia Sipahutar, Harry Suhartono, and Eko Listiyorini

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