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Jakarta, CNBC Indonesia – After the World Bank, now it is the turn of the International Monetary Fund (IMF) to give its opinion on Indonesia’s economic prospects in 2021. The IMF provides panorama better for the Indonesian economy this year than the World Bank.
According to IMF forecasts, Indonesia’s gross domestic product (GDP) growth in 2021 will be 4.8%, 40 basis points (bp) higher than the IMF estimate of 4.4%.
By 2022, the IMF is even more optimistic than the World Bank. The Indonesian economy is projected to grow at 6% in 2022, while the World Bank forecasts that Indonesia’s GDP growth next year will be 4.8%.
The accommodative macroeconomic policies will continue to be applied for this year. The global financial institution has highlighted the issue of fiscal policy that supports economic recovery.
The government will continue to allocate a budget to deal with the Covid-19 pandemic as it has done in 2020. The government also allocates a budget for investments that have a large impact, one of which is infrastructure.
After being seconded, the government is trying to boost infrastructure development in 2021. A total of Rs 417.8 trillion was used for infrastructure development in an effort to restore the national economy.
From a monetary point of view, the unconventional policies of the Bank of Indonesia (BI), such as lowering the benchmark interest rate and participating in the repair of the budget deficit by buying public debt securities, are said to be fair in the midst of a crisis caused by the current pandemic.
The era of low interest rates, the weakening trend of the US dollar, and low investment returns in developed countries will lead to an entry into developing countries. This will also boost the prices of financial assets like stocks.
However, the government also does not want to lose this momentum to invite foreign investors to invest in Indonesia. The deregulation of policies that have been overlapping and the bureaucracy that becomes entangled with the ratification of the Employment Creation Law is considered positive.
Indonesia’s role in the Regional Comprehensive Economic Partnership (RCEP), which is the world’s largest economic cooperation bloc, is expected to rebuild a disrupted supply chain that can boost economic performance.
Training Sovereign wealth fund (SWF) called Indonesian Investment Authority (INA), which seeks to attract funds from foreign investors to be used to finance various infrastructure projects, is also expected to be a solution to the financing needs of non-indebted national development.
The focus on infrastructure development is expected not only to absorb the labor force amid the high unemployment rate in the country (almost 10 million people in August 2020), but domestic demand is also expected to increase, which will lead to economic growth.
The IMF considers that the banking system remains stable thanks to bold and timely political interventions. However, an adequate provision for credit losses will be important to a bank’s ability to absorb increased asset quality risk.
Thanks to the credit restructuring policy regulated by OJK, the bad credit ratio (bad loan/ NPL) was maintained despite a slight increase. But at the same time, the credit risk index (Loan at risk/ LaR) also increased by more than 20% until the end of last year.
