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Indonesia's uphill battle to recovery amid COVID-19 pandemic

Posted 25 days ago by Ryan Julian

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Global economic activity will continue to increase, as various countries roll out COVID-19 vaccinations, coupled with the ongoing fiscal and monetary policy stimuli. Global economic recovery will primarily be driven by China and the United States, several advanced economies, such as Europe and Japan, as well as developing economies, including India and the ASEAN.

Several early indicators in December 2020 pointed to ongoing global economic improvements. The Manufacturing and Services Purchasing Managers Index (PMI) remain in an expansionary phase. In addition, consumer confidence, especially in China and Europe, continues to grow along with business confidence in various jurisdictions.

Indonesia’s economic recovery in 2021 may not be at “full power”, with the COVID-19 pandemic expected to continue to dampen domestic consumption and investment
Bringing COVID-19 under control, as well as the recovery of the global economy and structural reforms to attract investment and fiscal support, are among the important factors that will impact the economy next year. Given these challenges, the government expects the economy to grow by 4.5 to 5.5 percent this year.

Meanwhile, global financial market uncertainty is expected to subside in line with expectations of global economic improvements, including the fiscal policy direction pursued by the new US administration, against a backdrop of abundant global liquidity and persistently low interest rates.

Bank Indonesia (BI) is optimistic that national economic recovery in 2021 can be realized by strengthening synergies through a prerequisite and 5 strategies. The prerequisite is vaccination together with the discipline of following COVID-19 protocols, while the 5 policy response strategies are: 1) opening up productive and safe sectors, 2) accelerating fiscal stimulus (budget realization), 3) increasing credit from the demand and supply side, 4) monetary stimulus and macroprudential policies, and 5) digitalization of the economy and finance, especially MSMEs. 

(source: The Jakarta Post/Antara/Indonesian Bank)

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