Economy: Moody’s Rating Agency predicted a decreasing growth of Indonesia’s economy to reach below 5 percent in 2020 as a result of a global slowdown due to the Covid-19 pandemic. According to Moody’s, the “global growth remains tepid and as Chinese demand for commodities could soften on the back of the coronavirus outbreak.” Nevertheless, even with a slowdown in growth, Indonesia’s economy continues to outpace most Baa-rated sovereigns, “allowing increases in average incomes.” Yet, at 12.4 percent GDP in 2019, Indonesia’s government revenue remains significantly below other nations’ Baa average of 27.6 percent. “It is the lowest of all investment-grade sovereigns. Weak revenue also weighs on debt affordability,” Moody’s report said.
Fortunately for Indonesia, these constraints are balanced by fiscal discipline that are based on a very strong adherence to a statutory deficit ceiling, which is at around 3.0 percent of GDP. In 2019, low deficits kept the government’s debt burden at around 30 percent of GDP, below the Baa median of 47.3 percent. On the external front, Indonesia’s current-account deficit was 2.7 percent in 2019, higher than its lowest level of 1.6 percent recorded in 2017. Indonesia’s external buffers were strong enough to withstand shocks, with foreign reserves recovering from rupiah depreciation in 2018. Looking ahead, Moody’s expects Indonesia’s reforms to reduce structural and fiscal constraints will continue—albeit slowly, just like the relatively slow progresses achieved over the past few years.
Industry: The ministry of industry has revised the growth target of industrial sector in Indonesia for 2020 to 2.5-2.6 percent from 5.3 percent sue to the economic impact of the COVID-19 pandemic. If the Indonesian economic growth is predicted to reach between 2.4 to 2.5 percent, (the growth) in the industry sector will be at 2.5 to 2.6 percent. However, in the worst-case scenario which projects a 0.5-percent economic contraction, the growth of industry is expected to reach 0.7 to 0.8 percent.
Still, the industry minister expected that manufacturing industry would survive from the impact of pandemic despite pressures in March, especially as the industry contributes 78.96 percent to national exports. According to the minister, “There are some (positive) records regarding the exports of the manufacturing industry in the first quarter of 2020 compared to exports in 2019. Food industry has recorded a significant increase (in exports), like the basic metal industry. Garment exports have declined, but (shipment of) rubber and rubber products has increased slightly.” The data on manufacturing exports for the January-March quarter has been promising, but such a good performance was impeded by the pandemic.
Trade: The Directorate General of Customs and Excise of the Ministry of Finance revealed that up to 19 April 2020, the value of import duties and taxes exemption for health equipment and goods used to combat the Covid-19 pandemic has reached Rp170.91 billion. This amount consists of exemption from import duties worth Rp67.23 billion, free of Value Added Tax and Luxury Goods worth Rp82.97 billion, and exemptions from Article 22 income tax collection of Rp20.69 billion.
The recipients of import duties and taxes exemptions are divided into three groups, namely the foundations or nonprofit organizations accounted for 47 percent of total exemption, the government 47 percent, and companies or individual 6 percent. The estimated value of imported goods provided for Corona counter measurement was Rp762.68 billion. Some of the items exempted from import duty include test kits, personal protective equipment, medicines, medical equipment, facial masks and so on. The biggest volume of goods imported up to 19 April was 17.10 million face masks, 3.26 million test kits, 1.95 million protective equipment, 1.49 million hospital supplies, 390,320 medicines, and 422,270 of other health-related goods.
Property: The Covid-19 pandemic in Indonesia hit property sector after showing a positive trend in early 2020, after a few years of stagnation. The pandemic has disturbed the performance of property sector. Property sales started to increase in the beginning of the year, rose 5 percent compared to the last quarter of early 2019, but then the pandemic has shaken the sales, particularly due to sharp fall of the non-subsidized houses.
The decline in property sector during pandemic is estimated to reach up to 50 percent in April compared to last year, mainly happens in property for middle class and above. The sales is still helped by sales from the lower middle class property as this segment will get fiscal stimulus from the government through increasing the quota of subsidized houses. The subsidy will be implemented through providing the Interest Difference Subsidy (SSB) and Down Payment Subsidy (SBUM). If the development and sales of the modest and subsidized houses run smoothly, the sales of middle to upper class houses would increase when the pandemic is over.