Faisal Basri: Indonesia's Economy Will Contract Longer

JAKARTA - Institute for Development of Economics (Indef) Senior Economist (Indef), Faisal Basri, projects that Indonesia will still experience an economic contraction until the first quarter of 2021. He said that economic improvements will only occur in the second quarter of next year.

In fact, said Faisal, Indonesia's economic contraction will last longer when compared to other developing countries.

"If we look at the impact of this pandemic, I estimate that the economy will experience a relatively longer contraction. So we will only have positive growth in the second quarter of next year," he said, in a virtual discussion, Thursday, November 26.

Faisal explained, in the first quarter of next year, economic growth will still be recorded at minus 0.7 percent. The new economic growth returned to positive by 1.4 percent in the second quarter.

As a whole, Indef estimates that Indonesia's economy in 2021 will only reach a growth level of 3 percent, lower than the government's projection of 5 percent.

Even though the trend of economic performance is getting better, he predicts, the number of COVID-19 infections in Indonesia has only reached the peak of the first wave in January and February.

"The vaccine has not been tested like Pfizer and Moderna, how much effectiveness has not been tested but has been ordered. Once again the vaccine is not clear," he said.

Faisal emphasized that the main factor that will determine the process of recovery and economic growth next year is the COVID-19 pandemic. This high level of uncertainty will still hold back the consumption of the middle to upper class, so that overall consumption will still be depressed in 2021.

"People are given BLT and given what is not effective either. Because the shadow of this virus still haunts them. So they are better off reducing their consumption and putting their money in the bank. Third party funds in the bank continue to rise. .