Strong signs of economic recession in Indonesia. All page

JAKARTA, KOMPAS.com – The threat of a recession is increasingly real in sight. This is because Finance Minister Sri Mulyani Indrawati again gave a signal that economic growth will be negative in the next third quarter.

Therefore, economic growth will experience a contraction for two consecutive times because in the second quarter, the economic performance of Indonesia registered a contraction of down to minus 5.23 percent.

Therefore, RI will technically enter the definition of recession.

Sri Mulyani said the economy in the third quarter will be from minus 2.9 percent to minus 1.1 percent.

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Furthermore, the State Treasurer also said that the burden of the State Budget (APBN) to support the performance of the Indonesian economy was very heavy.

This is because the new government debt until the end of August has reached Rs 693 trillion. On the other hand, state revenues also come under pressure when the government spends large amounts of state spending to boost economic performance.

Thus, the APBN deficit is also expected to exceed the goal of Presidential Decree Number 72 of 2020, which is 6.34 percent.

Less again

Sri Mulyani revealed that the Finance Ministry changed its economic growth projection again in the third quarter of this year. According to him, Indonesia’s economic growth in the third quarter will be in the range of minus 2.9 percent to minus 1.1 percent.

This figure is deeper compared to the initial projection, which is minus 2.1 percent to 0 percent.

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Overall, economic growth through the end of the year will be in the range of minus 1.7 percent to minus 0.6 percent. Previously, Sri Mulyani’s projection was in the range of minus 1.1 percent to positive 0.2 percent.

“The Ministry of Finance is reviewing forecast for September, the previous year for this year was from minus 1.1 percent to positive 0.2 percent. The latest forecast for September 2020 is minus 1.7 percent to minus 0.6 percent, “Sri Mulyani said at a virtual press conference for the National Budget on Tuesday (9/22/2020).

With the revised economic growth projection tending to be negative at the end of the year, Sri Mulyani said that economic growth would also be negative in the third and fourth quarters.

Previously, Sri Mulyani was always optimistic that in the fourth quarter the economy could still grow positively. However, the government is still looking for economic growth in the fourth quarter to get closer to zero.

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Mountain debt

The realization of public debt to finance the budget at the end of August 2020 reached 693.6 trillion IDR. The State Treasurer explained that this amount was equivalent to 57.2 percent of the estimate indicated in Presidential Decree Number 72 of 2020, which reached 1,220.5 billion IDR.

Meanwhile, compared to the same period last year, which amounted to Rs 285.1 trillion, government debt increased 143.3 percent.

“The burden on our APBN is extremely heavy, and this can be seen from the financing side,” Sri Mulyani said in a statement in the National Budget on Tuesday (9/22/2020).

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Sri Mulyani explained in more detail that the debt was mainly in the form of SBN issuance which reached Rs 671.6 trillion or 57.2 percent of the planned SBN issuance this year which reached Rs 1,173.7 trillion.

The increase in the value of the SBN issue reached 131 percent compared to Rs 290.7 trillion last year. The rest are loans worth 22 trillion IDR.

“If you look, there is an extraordinary increase in SBN,” Sri Mulyani said.

Meanwhile, in terms of investment financing until the end of August, the realization reached Rs 27.2 trillion. The investment was channeled to BUMN worth Rs 11.3 trillion, the Public Service Agency (BLU) worth Rs 11 trillion, and other institutions or bodies worth Rs 5 trillion.

“If viewed from the Presidential Decree target of Rs 257.1 trillion,” Sri Mulyani said. Regarding the granting of loans until the end of August, the realization reached Rs 1.7 trillion and the realized guarantee obligation was Rs 400 billion.

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Extended deficit

The Ministry of Finance also estimates that the deficit of the State Budget (APBN) this year will widen.

The Director General of Financing and Risk Management of the Ministry of Finance, Luky Alfirman, said that the 2020 state budget deficit is expected to exceed the goal contained in Presidential Decree Number 72 of 2020.

In the Presidential Decree, the APBN deficit points to IDR 1,039.2 trillion or 6.34 percent of the Gross Domestic Product (GDP).

“With a 6.34 percent deficit pandemic, there is a possibility that it will widen again, which we will monitor,” Luky said in a statement in the National Budget on Tuesday (9/22/2020).

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“In relation to this growing deficit, the additional debt burden will be followed by additional debt interest expense,” he continued.

As of August 31, 2020, the APBN has experienced a deficit of up to 500.5 trillion IDR. This figure is equivalent to 3.05 percent of the Gross Domestic Product (GDP). The APBN deficit is equivalent to 48.2 percent of the goal established in Presidential Decree 72 of 2020.

The deficit occurs due to lower state revenue figures, while state spending increases.

In detail, the state’s revenues until the end of August were recorded at 1,034.1 billion. This figure contracted by 13.1 percent compared to the realization in the same period last year, which amounted to Rp. 1,190.2 billion.

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In Perpres 72, the government expects state revenues to reach 1,699.9 by the end of the year. So realization equals 60.8 percent of the government plan.

Altogether, 1,534.7 trillion rupees or 56 percent of the allocation has been made in Perpres 72.

This figure also represents an increase of 10.6 percent compared to last year’s realization of 1,388.1 trillion IDR.

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