LPEM UI Predicts RI’s Second Quarter Economy to Grow 6.7 Percent
Jakarta (ANTARA) – (4/8/2021) The Institute for Economic and Community Research, Faculty of Economics and Business, Universitas Indonesia (LPEM FEB UI) predicts that the Indonesian economy in the second quarter of 2021 will grow 6.4 percent or with an estimate in the range of 6.2 percent to 6.7 percent.
“We estimate that Indonesia will come out of recession in the second quarter of 2021.” said LPEM FEB UI Macroeconomics and Financial Markets Economist Teuku Riefky in Jakarta, Wednesday.
Teuku stated that economic activity in the second quarter of 2021 was relatively strong due to several factors such as the easing of social restrictions regulations, government stimulus, and the period of Ramadan and Eid.
He explained that entering the second quarter as an indication of a significant economic recovery, credit performance increased sharply throughout April and May 2021, mainly driven by an increase in working capital loans and investment loans.
According to him, the positive growth in consumer credit and the acceleration of core inflation indicate that purchasing power is recovering even though consumers are still reluctant to shop.
Indonesia also continued to record a trade surplus for 13 consecutive months since May last year in the midst of the beginning of the second wave of the COVID-19 pandemic until June 2021.
On the other hand, the current account surplus is expected to remain in negative territory, not far from the figures for the first quarter of 2021 due to a smaller goods trade surplus and a continuing trade deficit in services.
“Indonesia no longer enjoys a surplus since early 2021 with a continuing current account deficit of 0.36 percent of GDP in the first quarter of 2021.” he said.
Meanwhile, imports of raw goods and capital goods began to rise in the second quarter, different from last year’s imports, which weakened due to the pandemic.
Imports of capital goods are still the main contributor to total imports, especially those consisting of machinery and electronic products, accounting for around 25 percent of total imports.
Industrial chemical products are also still the third highest imported product by Indonesia from abroad as the demand for medical equipment and materials is expected to increase in the near future.
This increase in imports is in line with signs of industrial expansion to support economic recovery as reflected in the PMI reading above 50 throughout May to June 2021. Exports were also relatively unchanged in the second quarter of 2021 because they were still dominated by raw commodities consisting of mineral resources, vegetable fats, and precious metals.
The significant surge in commodity prices due to the continued recovery in demand from the COVID-19 pandemic has contributed to a more significant share of Indonesia’s commodity exports.
The increase in imports of goods, which almost outpaced the improvement in exports, in line with the continuing trade deficit in services, has returned the current account to a deficit level. By looking at the foreign trade figures for the last three months, the current account deficit has the potential to persist in the second quarter.
On the other hand, the sharp spike in positive cases of COVID-19 and the prolonged social restrictions since late June are expected to hold back the progress of the economic recovery in the remaining quarters of this year including the third quarter of 2021.
Therefore, LPEM FEB UI projects that the Indonesian economy in the third quarter of 2021 will again decline in line with the surge in COVID-19 cases and the implementation of Emergency PPKM.
Teuku emphasized that the Indonesian government cannot avoid the negative impact on the economic aspect when the health aspect is being tightened. He said that although vaccination rates continued to increase, progress in vaccination speed was still relatively slow to achieve herd immunity in the near future. This is why LPEM FEB UI estimates that the Indonesian economy as a whole in 2021 will only be in the range of 3.2 percent to 3.9 percent.
Source: https://m.antaranews.com/berita/2306462/lpem-ui-predik-ekonomi-ri-kuartal-ii-tumbuh-67-persen
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