Economy: The International Monetary Fund (IMF) cut its projection for the Indonesian economy while predicting the global economy would slump into a deeper recession this year. The IMF now says the Indonesian economy would slump 0.3 percent this year, before rebounding to a 6.1 percent growth in 2021. The world economy is likely to see a 4.9 percent contraction this year, 1.9 percent lower than its April projection, and it would enter a U-shaped recovery with a 5.4 percent growth in 2021. Prolonged lockdown and social distancing have depressed consumption and services output while companies cut back on investment.
The global economic projection could be much worse should a second wave of the Covid-19 pandemic hit the US or Europe later this year, which means a classic L-shape nonrecovery. The IMF suggests policymakers to consider strengthening fiscal stimulus measures to respond to deteriorating economic conditions. Temporary targeted cash transfers to low-income households that kick in when the unemployment rate or jobless claims rise above a certain threshold—can be highly effective in dampening downturns. To date, the Indonesian government has allocated Rp695.2 trillion (US$ 49.3 billion) worth of COVID-19 spending to boost economic growth and strengthen healthcare systems amid the pandemic.
Finance: Indonesia’s finance minister announced that the government will channel a Rp30 trillion (US$2.9 billion) from its account at Bank Indonesia, as the central bank, to four state banks so they can use the funds to expand lending and support the economy. The minister said that the banks’ lending must target the real sector of the economy. The banks had been asked to apply an interest rate of 80 per cent of the central bank’s benchmark rate – which is now at 4.25 per cent. Commercial banks currently pay 5.5 per cent for most term deposits.
The government funds will be placed with Bank Rakyat Indonesia (BRI), Bank Mandiri, Bank Negara Indonesia (BNI) and Bank Tabungan Negara (BTN). The government expects that with the funds’ low interest rate, the state banks can take steps that would support the real sector through extension of credit at a lower lending rate. Meanwhile, the Financial Services Authority (OJK) expects 15.3 million customers to request loan restructuring totaling Rp1,352.5 trillion. Half of that amount was already under restructuring as of 5 June 15.
Business: The Covid-19 pandemic has forced the closures of shopping centers in Indonesia for several weeks. On June 15, 2020, the government of Jakarta Special Region allowed the re-opening of shopping centers. According to the Indonesian Shopping Center Management Association, eighty shopping centers have been opened. The conditions set by the local government are the application of health protocols in each of the shopping centers. The health protocol at the shopping center is implemented since visitors enter the building. Mall visitors are requested to make a queue, wash their hands, wear a mask, and their body temperatures are measured. The allowed capacity of mall visitors is only 50 percent.
When visitors are in the mall, the management also monitors the application of health protocols. The managements provide signs as a path for visitors. The elevator facility transports visitors with a limited amount of capacity, 8 persons at maximum. The escalator is also given a sign, adjusted to a distance of approximately three steps. The arrangement of the chairs in the restaurant is also adjusted with health protocol by marking the seats that may and may not be occupied. Some shopping center managements use sensors at several points to reduce physical touch. Many of malls use other kind of sensors, such as elevator buttons, hand sanitizers and parking tickets, thereby reducing physical contact.
Industry: Car exports from Indonesia suffered a sharp decline in the first five months of 2020. According to data from the Association of Indonesian Automotive Industries (Gaikindo), from January to May 2020, car exports in the form of a whole or completely build up (CBU) were only 95,387 units. Meanwhile, total car exports in the same period last year reached 119,125 units. The exports in February was 30,446 units, dropped to 28,229 units in March, then slumped to 11,302 units in April, and the export volume reached the bottom of 6,500 units in May.
The cause of exports’ downward trend is not only due to the “lockdown” or social and economic restriction applied in the export destination countries in anticipation of the Covid-19 further outbreak. The pandemic has also reduced the purchasing power for automotive products in many countries. Financial capacity to buy cars has been weakening. The consumers in Middle East countries, for example, suffer from lower purchasing power due to the downward trend of oil prices. The prices have dropped to only US$30 per barrel, and it is estimated that in 2022 it will only return to US$60. Saudi Arabia also plans to increase the value added tax from 5 percent to 15 percent, which would increase the prices of automotive products. Similar situation also happens in various regions like Africa and South America.