Fiscal: The Indonesian government is searching for foreign loans to support the alleviation of Covid-19 pandemic. As the initial stage, the government has got commitment from the Asian Development Bank and the World Bank. The scheme of loans from those two multilateral financial lenders is still in the process of negotiations. On 21 March, the ADB has provided a grant valued at US$3 million for the pandemic alleviation. The loans are needed to anticipate the shortage of funding in handling the pandemic. So far, state funds of around Rp121.3 trillion has been reallocated in the 2020State Budget (APBN 2020). The funds are sourced from the reallocation of ministries/institutions expenditures worth Rp62.3 trillion and transfer to regions as well as village funds worth Rp59 trillion.

APBN 2020 set aside the threshold of foreign loans at Rp37 trillion. As of February, the realization of foreign loans was Rp1.7 trillion or 4.6 percent of the threshold. In the last ten years, the Indonesian government has been increasingly relying on the issuance of state debt securities to finance the enlarging state budget deficit. As of end January 2020, total outstanding of government debt was Rp4,817.5 trillion. It consists of Rp751.9 trillion (15.6 percent) of loans and Rp4,065.6 trillion (84.4 percent) marketable debt securities. The debt to GDP ratio was 30.2 percent.

Trade: The flow of containers in the Port of Tanjung Priok in the last two months decreased by 5.13 percent. Over January-February 2020, the flows reached 992 thousand TEUs, dropped by 53 thousand TEUs compared to January-February last year of 1,045 thousand TEUs. The decline is a direct impact of the outbreak of the Corona virus, the initial spread of which occurred in Wuhan, China. This condition is understandable, because Corona outbreak in China since December 2019 has been decreasing dramatically the productivity, according to Indonesia Port Corporations, another name of the state-owned port company PT Pelabuhan Indonesia II (Persero).

Despite the decline in the first two months of this year, container flows will increase in the next few months. The situation in China is reportedly starting to recover and the industry is starting to reactivate the production. So far, the IPC has yet to make a change in the target of containers for 2020 and it is still conducting studies and observing the development of the global economy in the next 2-3 months. Especially the situation in China, which contributes the most to the amount of container flow at the Port of Tanjung Priok. Previously, IPC targeted the flow of containers in 2020 at8.1 million TEUs.

Tourism: The Indonesian Minister of Tourism and Creative Economy revealed that Covid-19 pandemic had hit tourism and creative economy. Tourism industry not only hospitality services, but also restaurants, event organizers, and travel agencies. There are millions of jobs in the sector and in the government will soon announce concrete steps related to the issues, including economic stimulus to ease the burden and costs for tourism sector. For now, the ministry is preparing some actions, among others through budget reallocation in managing the impact of the pandemic. One of the focus is to reduce the potential for layoffs of employees in the sector.

According to the Association of Indonesian Travel Agent, the business of 8,000 travel agents and tourism has been weakening. The sales drop significantly, while the cancellation of tickets and travel package and tourism reached 96 percent. The losses suffered by travel agents reached Rp4 trillion in February and it will increase because of sales drop while ticket cancellation or rescheduling boosts. The Association of Indonesian Hotel and Restaurant noted that up to March 2020, the hotel occupancy rate in all categories slashed by 20 percent and the restaurant visitors fell 20 to 50 percent.

Retail: Shopping centers or malls in the Greater Jakarta area (Jabodetabek) have been asked to anticipate the spread of Covid-19 outbreak by limiting operating hours. Some of them are temporarily closed, like Plaza Indonesia Shopping Center in Central Jakarta that will close from 25 March to 3 April 3. Meanwhile, Lippo Malls changes the operating hours in 30 malls located in Jabodetabek, Bandung, Bali, and Manado. The malls open only 7 hours Monday- Thursday, 9 hours on Friday, and 12 hours in weekends and holidays.

The Indonesian Retailers Association said the impact of sluggish incomes due to the Covid-19 has been recorded in various retail business formats. Hypermarkets, Supermarkets and Minimarkets continue to open outlets as usual and there is an increase at the weekend. While for retail stores with non-food items selling secondary and tertiary goods are suffering significant decrease of sales. Revenue decline also dropped significantly to 50 percent. Likewise, the decline in the number of shoppers in shopping centers was very significant of more than 50 percent. Meanwhile, the decline of shoppers in supermarkets, minimarkets and hypermarkets only reach around 15 percent.

Finance: The World Bank said on Monday it has approved a $300 million loan for Indonesia to assist in financial sector reforms. The loan will provide budget support for Indonesia’s reform agenda by expanding financial market outreach, allowing more focus on technology, and promoting sustainable finance practice. The approval came after the Indonesian government announced that the 2020 budget deficit may widen beyond its current forecast of 2.5% of gross domestic product amid pressures from coronavirus outbreak. The loan is aimed to assist the government of Indonesia in implementing financial sector reforms that will help sustain economic growth and achieve the country’s shared prosperity goals. About half of the adult Indonesian population do not have access to bank accounts, leaving them with limited opportunities to invest in their future and protect themselves from financial and non-financial shocks.

The development policy loan will provide budget support for Indonesia’s reform agenda in three key policy areas. First, increase the size of the Indonesia’s financial sector by expanding its outreach, broadening financial markets products and mobilizing long-term savings. This will increase the availability of funds and access to financial opportunities for both individuals and firms. Second, improve the efficiency of the financial sector by making financial practices more transparent, reliable and technology oriented. This will benefit both individual and enterprises by helping to channel savings into the most productive investment opportunities in a less costly, faster and safer way.

Leave a Reply

Your email address will not be published. Required fields are marked *

Post comment