Economy: Following the Covid-19 pandemic, the Economist Intelligence Unit (EIU) has revised its growth forecasts for all countries across the world. The results paint a bleak picture. Across the G20, all but three countries will register a recession this year. The global economy will contract by 2.2%. The global economic picture is looking bleak, with recessions in almost every developed economy across the world. The EIU assumes that there will be a recovery in the second half of the year, but downside risks to this baseline scenario are extremely high, as the emergence of second, or third waves of the epidemic would sink growth further.

For Indonesia, the EIU revised down the economic growth from previously forecasted at 5.1 percent to only 1 percent. Previously the Indonesian Finance Minister has conveyed a worst-case scenario that the country’s economy might grow zero percent because of the pandemic. It might happen if the duration of pandemic lasting for more than 3 to 6 months and then there are lockdown, international trade drop below 30 percent, and international flights fall up to 75 to 100 percent.

Trade: The Ministry of Trade issues regulations on the relaxation of imports of medical devices and personal protective equipment, in order to secure the supply during the Covid-19 pandemic. This rule is stipulated in the Minister of Trade Regulation No. 28/2020, which provides relaxation or ease in the importation of certain products, particularly related to the importation of medical devices and personal protective equipment. These products are face masks, medical clothing, gloves, and other medical devices. Import relaxation is the exception to the only conditions that exist, namely the provisions of the Surveyor Report (LS) in the country of origin or port of loading, and restrictions on the port of entry. Thus, imports of these products do not require any licensing.

This relaxation will be given until 30 June 2020. The shipment of certain products only needs to be proven by the Bill of Loading (B / L). “The import relaxation under is expected to accelerate the entry of medical devices urgently needed during the pandemic so that the availability of equipment is adequate and there is no shortage, “said the Minister of Trade. The regulation was issued as a follow-up to Presidential Decree No. 9/2020, which stipulates special treatments of the import of goods used for handling Covid-19 pandemic

Finance: The Financial Services Authority (OJK) has issued OJK Regulation (POJK) No. 11/2020 concerning National Economic Stimulus. The POJK is intended to help business sector, especially MSMEs affected by the spread of Covid-19, both directly and indirectly. With this regulation, the government gives special treatment to debtors who experience difficulties in paying debts to commercial banks. Debtors include, among others, those engage in tourism, transportation, hospitality, trade, processing, agriculture and mining sectors. The POJK clearly stipulates that in principle banks can restructure all loans or financing to all debtors, including MSME debtors.

Credit restructuring that can be provided by banks are interest rate reduction, extended period, reduction of principal arrears, reduction of interest arrears, additional credit/financing facilities, and credit/financing conversion to temporary equity participation. The restructuring scheme is determined by the bank and highly depends on the results of the bank’s identification of the debtor’s financial performance or the assessment of the business prospects, and the debtor’s capacity to pay. The period of restructuring also varies depending on the bank’s assessment of its debtors with a maximum term of 1 year.

Investment: Indonesia’s International Investment Position (IIP) recorded a higher net liability of 30.2 percent to GDP at the end of 2019 due to an increase in Foreign Financial Liabilities (FFL). According to Bank Indonesia, the net liability was US$338.2 billion in the fourth quarter, up from U$317.3 billion (29.7 percent of GDP) in the same period of 2018. The increase in Indonesia’s FFL, primarily backed by an influx of foreign capital in the form of portfolio investment and direct investment. Over the same period, Indonesia’s Foreign Financial Assets (FFA) also grew primarily due to rising transactions of direct investments and reserve assets. In fourth quarter of 2019, the FFA position rose 2.1 percent (quarter on quarter), or US$7.6 billion, to reach US$373.3 billion. The increases in FFA were offset, however, by a decline in transactions of portfolio investment and other investment assets.

Meanwhile, the ratio of IIP’s net liability to GDP at the end of 2019 was recorded at 30.2 percent, down from 30.4 percent at the end of 2018. In 2019, the FFL position expanded by US$47.6 billion (7.2 percent year over year), primarily influenced by an influx of long-term foreign capital despite persistent global financial market uncertainty. The FFA position also increased by US$26.6 billion (7.7 percent y-o-y), mainly driven by an increase in the Indonesian resident’s assets placements in overseas banks. Bank Indonesia was of the view that the IIP for the whole year of 2019 is still healthy as reflected by the structure of net liability that is dominated by long-term financial instruments.

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