LPEM FEB UI: Indonesia Economic Outlook Q3-2021
Rifdah Khalisha – Public Relations FEB UI
DEPOK – (4/8/2021) The Institute for Economic and Community Research (LPEM) FEB UI held a Press Conference entitled “Indonesia Economic Outlook Q3-2021,” on Wednesday (4/8). Presenting researchers from LPEM FEB UI, Jahen F. Rezki, Teuku Riefky, and Muhammad Hanri as presenters.
Although still in negative territory, Indonesia’s gross domestic product (GDP) growth is at its closest point to a positive area since the outbreak of the pandemic. LPEM projects that the Indonesian economy in the second quarter of 2021 will grow 6.4 percent or in the estimated range of 6.2 percent to 6.7 percent. Meanwhile, in the full year of 2021, the Indonesian economy will grow in the range of 3.4% to 3.9%, due to economic obstacles due to the Implementation of Restrictions on Community Activities (PPKM), which have been in effect since early July 2021.
Jahen explained that the significant economic recovery in the second quarter of 2021 was indicated to receive the influence of several factors that increased sharply throughout April and May 2021, especially the increase in working capital loans and investment loans. Moreover, in April and May, the number of COVID-19 cases started to decline. Even though at the end of June, the number of COVID-19 cases had increased again.
LPEM projected that in the second quarter of 2021 or from April to June, Indonesia will experience a fairly recovered economic condition. The turnaround is quite large. Jahen also explained some of the supporting factors, “First, the more intensive vaccinations, because this is included in the key strategy taken by the government to deal with the COVID-19 issue. In the end, lowering the number of people who tested positive at the start of the year.”
“Secondly, we are going through Ramadan. Usually, in Ramadan conditions, consumption levels will recover enough, many people shop and spend. There was a relaxation in social mobility in the second quarter yesterday. Finally, there is a government stimulus, so we assume that economic conditions in the second quarter will improve.” he continued.
In addition, Indonesia’s trade balance continued to post a surplus for 13 consecutive months, from May 2020 to June 2021. However, the sharp spike in COVID-19 positive cases and prolonged social restrictions since late June are expected to hold back progress in the economic recovery in the remainder of the quarter of this year.
Teuku Riefky estimates that Indonesia will emerge from recession with the economy growing around 6.4% (yoy) in the second quarter of 2021. The reason is that in the first quarter of 2021, GDP grew -0.74% (yoy), not as bad as the previous three quarters in almost all sectors. Furthermore, several sectors enjoyed positive growth during the pandemic, and expanded further in the first quarter of 2021.
The manufacturing sector, which accounts for more than a fifth of the size of the Indonesian economy, grew 1.38% (yoy), up from -3.31% (yoy) in Q4 2020. The wholesale and retail trade sector, which contributed 13% of the national GDP, grew -1.23% (yoy) from -3.66% (yoy) in Q4 2020. He said, “With the implementation of PPKM in most of the first quarter -2021, it is not surprising that all components of GDP expenditure decreased, except for government consumption, exports and imports.”
Monitoring the latest developments, it seems clear that the thing that is uncertain and that which no economist can predict, is the potential mutation of the COVID-19 virus along with the possibility of a further wave of the pandemic.
“The potential for a further wave of COVID-19 often escapes the government’s consideration, or at least at the policy implementation level, until the wave begins to occur. As happened in South Korea in mid-2020 and India in early 2021.” Riefky said.
The first wave was enough to destroy the economy, make people lose their jobs and savings, and force the government to try hard to find a fiscal space to fund the stimulus. Thus, the emergence of signs of economic recovery has made all aspects of society impatient to immediately carry out normal economic activities.
Also, predictions reveal that the open unemployment rate will reach the range of 7 percent of the total workforce in August 2021. This figure is up from the position in February 2021 of 6.26 percent, but not much different from August 2020 of 7.07 percent.
Hanri said, “The unemployment rate may be higher than 7 percent, but probably not far from 7 percent. Maybe 7.1 percent or 7.3 percent is our maximum estimate,”
According to him, the implementation of the emergency and level 4 Community Activity Restrictions (PPKM) implementation in July to August 202 has triggered an increase in the unemployment rate. On the other hand, the factor that can restrain the increase in unemployment is the realization of the National Economic Recovery (PEN) fund, especially the support fund for MSMEs and corporations. Even though as of the end of last July, Rp171.77 trillion of funds had only been absorbed by Rp52.43 trillion.
“Considering that the target of the allocation of business incentives is entrepreneurs, who will later recruit workers, this should be able to reduce the rate of open unemployment,” he added.
A total of 5.01 million workers in shopping centers or malls and shop houses were affected by PPKM level 4. In detail, 3.34 million were in Java and Bali, while 1.67 million were outside Java and Bali. In addition to mall and shop-house workers, Hanri estimates that 63,000 cinema workers will also be affected by emergency PPKM level 4 in Java and Bali. This is because malls, shop houses or retail trades, and cinemas, have been forced to close during the emergency PPKM since July 3, 2021.
He stated, based on data from the National Labor Force Survey (Sakernas) in 2021, the average wage for the affected workers was in the range of Rp. 1 million to Rp. 1.4 million. “So, they are relatively not people who are strongly resilient to economic disruption.” he said.
LPEM UI estimates that only 0.5 percent of affected workers receive assistance from the Pre-Employment Card program. In fact, as many as 53.3 percent of the workers need direct cash assistance (BLT) and 24.1 percent of government assistance without conditions. However, of the many affected workers, less than 1 percent received access to the Pre-Employment Card in anticipation of disruption. (hjtp)
Source:
https://mediaindonesia.com/economy/423106/lpem-ui-optimis-percepat-economy-triwulan-ii-62-67
https://www.cnnindonesia.com/ekonomi/20210804174215-532-676461/lpem-ui-projecti-pengangguran-naik-ke-7-persen-pada-agustus.
https://www.kabarbisnis.com/read/28108317/gawat-ada-potensi-5-01-juta-pekerja-mal-terdampak-ppkm-level-4
https://ekonomi.bisnis.com/read/20210804/9/1425861/lpem-ui-projeksi-ekonomi-kuartal-ii2021-tumbuh-64-persen
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