JAKARTA: The World Bank has maintained its forecast for Indonesia’s gross domestic product (GDP) growth for this year as the country lags behind some Asian economies in containing Covid-19 and in trading manufactured goods.
In its March outlook, the Washington-based lender projects Indonesia’s GDP to grow 4.4% this year, an unchanged figure from its December outlook.
The forecast stands at the same level as the average growth expected for the East Asia and the Pacific (EAP) region, excluding China and Vietnam.
“Indonesia chose not to fight hard the disease by hurting livelihoods, ” World Bank EAP chief economist Aaditya Mattoo told The Jakarta Post in a video interview.
“In a way, it had a more accommodative approach to the disease, which made the economic distress in the short run less a shock than in the Philippines, but the long-term prospects were correspondingly less promising than those in Vietnam, ” he added.
The outlook noted that Indonesia still largely relied on prolonging mobility restrictions, locally called micro-scale public activity restrictions (PPKM Mikro), to contain the pandemic, whereas countries such as China and Vietnam relied on the more effective mass testing and tracing strategy.
The bank noted that Indonesia had also failed to capture the revival of global trade in manufactured goods, such as electronics, when compared to its neighbours. Instead, the country’s recovery is poised to ride on recovering commodity prices such as coal and palm oil.
The World Bank adds to a list of multilateral organisations that forecast Indonesia to achieve a near-economic recovery in 2021 as its GDP grows above 4%, reversing the 2.07% contraction last year, but short of the 5% growth it enjoyed in the decade before Covid-19 struck the global economy.
In January, the International Monetary Fund (IMF), the World Bank’s twin intergovernmental body, also downgraded its forecast for Indonesia’s annual economic growth this year by 1.3 percentage points to 4.8%, a weaker growth figure than the World Bank’s.
Contrary to the World Bank and the IMF, the Organisation for Economic Cooperation and Development (OECD), in its March outlook, upgraded the country’s annual growth forecast for this year by 0.9 percentage points to 4.9%.
The World Bank’s Aaditya said the region was seeing positive developments in the form of vaccination campaigns, although the current stocks and allocations of vaccines might force countries to adjust their vaccination strategy and complement it with other interventions. “But the slow rollout of the vaccines could reduce growth as much as one percentage point, ” said Aaditya.
The Indonesian government started the Covid-19 vaccination programme in mid-January wherein at least six million people, mostly medical workers and public workers, have received the first jab as of Thursday, according to data from the Health Ministry.
At the same time, the government is imposing PPKM in some cities or regencies across Java and Bali islands, as well as South Kalimantan, Central Kalimantan, South Sulawesi, East Nusa Tenggara and West Nusa Tenggara until April 5. For this year, the government raised the recovery budget by 20.6% year-on-year to 699.4 trillion rupiah (US$48.51bil or RM200bil), of which 27% is for small business assistance and one-fourth for healthcare. It had spent 10.9% of the budget as of March 17. ─ The Jakarta Post/ANN