Optimistic Outlook for Second Quarter

KOMPAS/PRIYOMBODO

Construction workers finish a concrete pillar on 14 Dec. 2019 at the site of the Light Rail Transit (LRT) Jabodebek project on Jl. H.R. Rasuna Said in South Jakarta. According to the World Bank Quarterly Report, Indonesia’s economic growth is estimated to reach 5 percent in 2019 and 5.1 percent in 2020.

The government has projected economic growth of between 6.9 percent and 7.8 percent in the second quarter of this year. However, the target will be achieved only if the spread of COVID-19 is controlled.

JAKARTA, KOMPAS — Although the Indonesian economy was still contracting in the first quarter of 2021, many economic observers are optimistic that it will grow in the rest of the year. The optimistic outlook is based on an upward trend in economic recovery since the 5.32 percent contraction recorded in the second quarter of 2020.

President Joko “Jokowi” Widodo said he was optimistic that economic growth would reach 7 percent in the second quarter. "The growth has showed an improving trend, and we have been able to endure the pandemic. If the upward trend continues, I am optimistic that the 7 percent target can be achieved, ” the President said at Merdeka Palace in Jakarta on Wednesday (5/5/2021).

Also read: Jokowi-Amin, Jump

The head of Statistics Indonesia (BPS), Suhariyanto, said during a virtual press conference on Wednesday that the Indonesian economy had contracted 0.74 percent year-on-year in the first quarter of 2021. However, despite the contraction, the economic condition was better than in the fourth quarter of 2020, during which the economy shrank 2.19 percent.

Separately, Coordinating Economic Minister Airlangga Hartarto said that based on constant prices, Indonesia’s gross domestic product (GDP) was Rp 2,589.8 trillion in the second quarter of 2020, slightly below the Rp 2,703 trillion recorded in the first quarter of 2021.

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Coordinating Economic Minister Airlangga Hartarto.

"At constant prices, there was an increase of more than 4 percent in the first quarter of 2021 from the second quarter of 2020, when the Indonesian economy began to suffer a contraction. With this increase, the government is optimistic that its projected growth of 6.9 to 7.8 percent can be achieved in the second quarter of 2021," he said.

Also read: Getting off the Slow Line

For the second quarter, the government predicts that all components of GDP will grow. Household spending is projected to grow between 6.9 and 7.9 percent, the spending of non-profit institutions serving households is to grow between 5 and 5.5 percent, government spending is to grow between 7.6 and 7.9 percent, investment between 6.4 and 8.3 percent, exports between 10.5 and 12 percent and imports between 9.5 percent and 14 percent.

Despite the mudik (exodus) ban ahead of Idul Fitri intended to prevent the spread of COVID-19, the government is trying to make this year’s Ramadan and Idul Fitri opportunities to push up economic growth for the second quarter.

KOMPAS/TOTOK WIJAYANTO

An employee affixes straps to face shields on 2 April 2020 at Bebek Kaleyo in Sunter, North Jakarta.

A number of initiatives have been taken by the government to increase household spending during the second quarter, such as the obligation imposed on employers to provide an annual religious holiday allowance (THR) and a 13th salary to their workers, as well as the THR allowance for civil servants and members of the Indonesian Military (TNI) and police.

Approaching the holidays, the government has also sped up the disbursement of social assistance funds.

According to Airlangga, the disbursement of THR and the 13th salary allowances are estimated to increase household spending by Rp 215 trillion. Approaching the holidays, the government has also sped up the disbursement of social assistance funds.

Also read: Public Polarized In Approval of Government

Airlangga said he was optimistic that an improvement in the handling of the pandemic could help achieve the economic growth target of between 4.5 percent and 5.3 percent in 2021. He believed the improvement in the handling of COVID-19 would continue until 2022 and would help achieve the economic growth target of between 5.4 percent and 6 percent during the year.

Challenges

The executive director of the Institute for Development of Economics and Finance (Indef), Tauhid Ahmad, estimated that the economic contraction would end in the second quarter of 2021, during which Indonesia would enter a recovery phase with growth. However, he said there were still many challenges that needed to be overcome in order to achieve the government’s economic growth target of above 7 percent.

KOMPAS/KARINA ISNA IRAWAN

The executive director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad.

"Indeed, there will be positive growth in the second quarter of 2021, but it will not reach the upper limit of the government’s target as the increase in household spending will not be optimal until the middle of the second quarter," he said.

Meanwhile, the executive director of the Center of Reform on Economics (CORE), Mohammad Faisal, said the improvement in economic growth was in line with the increase in the people’s mobility. However, he cautioned

that the easing of mobility restrictions should be balanced with the implementation of strict health protocols.

Also read: Implementation of Job Creation Law

The government must also increase COVID-19 mitigation efforts, such as testing, tracing and treatment of those infected with the virus. It must also intensify the vaccination program, especially since new variants of COVID-19 have been identified in Indonesia and have infected local residents.

"The government\'s firmness in enforcing health protocols can affect the sustainability of economic growth itself," said Faisal.

Workforce

In line with improvements in a number of economic indicators, the number of workers affected by the COVID-19 pandemic began to decline in February 2021. However, there are millions of people who are still suffering a drop in earned income or are without jobs.

The National Labor Force Survey conducted by Statistics Indonesia (BPS) indicated that as of February, one year after the first COVID-19 cases were identified in Indonesia, the number of people affected by the COVID-19 pandemic had reached 19.1 million, or 9.3 percent of the total working age population.

At that time, the number of workers affected by the pandemic was 29.12 million, or 14.28 percent of the total working age population.

The number was better than in August 2020. At that time, the number of workers affected by the pandemic was 29.12 million, or 14.28 percent of the total working age population.

KOMPAS/RIZA FATHONI

The Alliance of Entertainment Employees and Entrepreneurs hold a peaceful protest on Tuesday (21/7/2020) at City Hall in Central Jakarta. The group called on Jakarta Governor Anies Baswedan to reopen night entertainment venues in the city during the second transitional phase of the large-scale social restrictions (PSBB), as well as assistance for employees who had lost their jobs as a result of the epidemic’s impacts on the economy.

The people affected by the pandemic as of February consisted of 1.62 million people who were totally unemployed, 650,000 people who were not part of the work force and 1.11 million people who were temporarily unemployed. In addition, the majority, or about 15.72 million people, still worked with reduced hours and reduced wages.

This means that, since August 2020, about 940,000 unemployed people had found new jobs. In addition, 660,000 people who were laid off had begun to work again. As many as 8.31 million people who had previously experienced a reduction in working hours and wages had returned to normal conditions. (DIM/INA/AGE/HAR)