This Economist Is Optimistic That Economic Growth Can Reach 3.5 Percent By The End Of 2021

JAKARTA - Executive Director of the Center of Reform on Economics (CORE) Muhammad Faisal projects that economic growth will remain positive throughout 2021 in the range of 2.5-3.5 percent year on year.

"The potential rather than uncertainty hinders economic recovery so that growth cannot be high let alone reach what the government predicts. This is below the government's predictions, but on the other hand it is not too low," said Faisal in a virtual discussion of the CORE Mid-Year Review in Jakarta, quoted from Antara. , Tuesday 28 July.

Apart from being based on minus 2020 figures, economic growth in 2021 will also remain positive, supported by export growth which dampens contraction in household consumption.

He said that in the second quarter of 2021, household consumption actually began to expand, but further recovery is expected to be hampered in the third quarter of 2021 due to the increase in positive cases of COVID-19.

This increase in cases has made the government re-implement the Enforcement of Community Activity Restrictions (PPKM) which has an impact on economic activity.

"Social assistance programs must be a cushion that can dampen especially when PPKM is carried out. Besides functioning to maintain purchasing power, social assistance is also an incentive for the lower middle class who depend on activities outside the home to meet their daily needs," said Faisal.

Meanwhile, according to Faisal, throughout 2021 the trade balance will return to a surplus of close to 20 billion US dollars. This surplus will be driven by an increase in the value of exports and a decrease in imports.

"When demand in terms of household consumption and government spending declines or the recovery is delayed, exports actually grow very high because almost all of the mainstay commodities experience an extraordinary price increase," said Faisal.

At the same time, as in 2020, imports tend to be low and even decline when domestic economic activity weakens due to restrictions on community activities. However, Faisal predicts that the pressure on imports in 2021 will be smaller than in 2020.

Faisal also estimates that economic growth in the second quarter of 2021 will reach 4.5-5.5 percent yoy. With the implementation of PPKM, economic growth in the third quarter of 2021 and the fourth quarter of 2021 is projected to be slightly smaller at 3.0-4.5 percent yoy.

"But if we look at the third quarter and fourth quarter of 2021, uncertainty has increased again so that the range is wider, it could be between 3-4.5% which is clearly lower than the second quarter of 2021," he said.