Indonesia revises 2020 GDP forecast to a deeper slump

Jakarta

INDONESIA revised down its 2020 gross domestic product (GDP) outlook on Tuesday, expecting a steeper contraction due to the fallout of the coronavirus pandemic even as it tries to ramp up spending to cushion the blow.

South-east Asia's largest economy would likely shrink within a range of 1.7 per cent to 0.6 per cent on an annual basis in 2020, Finance Minister Sri Mulyani Indrawati told a virtual news conference. The previously expected range was 1.1 per cent contraction to 0.2 per cent growth.

The forecast took into account a new third-quarter GDP outlook of a contraction of 2.9 per cent to 1 per cent, from the previous range of 2.1 per cent to flat growth, and potential negative growth in the October-to-December period, she said.

Indonesia's GDP shrank for the first time since 1999 in the April-to-June period by 5.32 per cent.

Dr Sri Mulyani said: "Although we saw improvement in the third quarter and we could see the economy recovering, it was still very early, fragile and must be guarded."

She described the recovery in some sectors as flattening based on August data.

She said she hoped the semi-lockdown now in place in Jakarta would not disrupt the economy too much and pledged the government would go "all out" to accelerate spending to support the economy.

Bank Mandiri economist Andry Asmoro said the new forecast was closer to his 2020 outlook of a 2.2 per cent yearly contraction, based on "a flattening recovery and a drop in transactions due to rising Covid-19 cases".

The number of coronavirus cases in Indonesia rose by 4,176 on Monday, a fresh record daily increase that took the country's total tally to 248,852; 9,677 people have died.

The government had spent 56 per cent of its 2020 budget in the January-to-August period, up 10.6 per cent from last year; state revenue had fallen 13.1 per cent, with corporate tax payments under pressure, official data showed.

As of August, the fiscal deficit was 3.05 per cent of GDP. The full year deficit outlook may be wider than the previously expected 6.34 per cent.

The government will monitor its implications for debt issuance, said Luky Alfirman, the finance ministry's head of financing department said. REUTERS