The minister made the decision referring to forecasts on Indonesia's economic growth this year from several institutions including the World Bank, the Organisation for Economic Cooperation and Development (OECD) and the Asian Development Bank (ADB).
World Bank's Senior Economist Ralph van Doorn has predicted that Indonesia's economic growth would slow or be stagnant this year due to the impact of the Covid-19 (coronavirus) pandemic.
"We estimate Indonesia's economic growth to slow into zero percent. This assumption is based on a two-month implementation of the large-scale social restrictions since April," he said at an online discussion in early June.
Meanwhile, the OECD predicted that Indonesia's economy would shrink by 2.8 per cent in 2020.
The figures, which came following uncertainties amid the Covid-19 pandemic, reflected the sluggish global economy which was predicted by the OECD to contract by at least 6 percent in 2020.
The world economy is likely to contract up to 7.6 percent if a second wave of the pandemic happens, the OECD said.
The ADB, meanwhile, predicted that the Indonesian economy would contract by 1 percent in 2020 due to the Covid-19 pandemic.
"In the second quarter, we would face pressures that are not easy. It is likely that we would have to deal with negative economic growth that has been estimated by the Finance Ministry's Fiscal Policy Agency at minus 3.8 percent," Indrawati said at a virtual Town Hall Meeting 2020 over the weekend.
Indonesia's growth this year is highly dependent on an economic recovery in the second and third quarters, she said.
The budget for the Covid-19 handling programs set by the Finance Ministry amounted to 695.2 trillion rupiahs (about 49.2 billion U.S. dollars), up by 290.1 trillion rupiahs (US$20.5 billion) from the original proposal.
Indrawati said the cost for the pandemic handling has drastically changed the structure of the state budget, creating tremendous pressures on the national economy.
In addition, she said the state revenues have fallen sharply, widening the state budget deficit from the early estimate at 1.76 percent of GDP to 6.34 percent of GDP.
The government has prepared a program to boost the economic recovery, she said.
Indonesian President Joko Widodo has requested that the program be implemented soon to prevent the growth in the second, third and fourth quarters from further decline into a negative level.
At a teleconference meeting in Jakarta this week, Widodo expressed hope that the program would shortly recover domestic economic activities.
Meanwhile, Indonesia's central bank, Bank Indonesia (BI), projected that the country's growth in 2020 would be in the range between 0.9 percent and 1.9 percent following the new normal scenario, and hence the economy was expected to recover in the third quarter of this year.
"The economy would gradually recover in the third and fourth quarters in line with the government's plan to make economic activities productive but safe," BI Governor Perry Warjiyo said this week.
According to Warjiyo, the projection is based on the economic growth in the first quarter which reached 2.97 per cent, and was expected to decline quite deeply in the second quarter of 2020.
As the government has issued a fiscal stimulus policy to contain the Covid-19 pandemic and recover the economy, the central bank has also issued a policy on monetary relaxation to help speed up the recovery.
The fiscal stimulus, especially the social relief aid, is expected to be well received by the poor and those who tend to be poor due to the Covid-19 pandemic, Warjiyo said, adding that incentives should also be provided for the business community.
Deputy Chairman of the Indonesian Chamber of Commerce and Industry Erwin Aksa said the government should immediately provide liquidity in the forms of working capital to the business community and cash aid to the impacted people to generate their purchasing power and demands from the market.
Previously, the chamber suggested that the government increase the amount of stimulus from 405 trillion rupiahs (US$28.7 billion) to 1,600 trillion rupiahs (US$113.4 billion) to mitigate the impact of the virus on the economy.
Nevertheless, all the recovery processes and programs would depend mainly on how the health protocols are implemented to curb the COVID-19 spread.
The government on Saturday reported that COVID-19 cases in Indonesia rose by 1,226 within one day to 45,029, with the death toll adding by 56 to 2,429. - XInhua/Asian News Network