Warning From IMF For Developing Countries: COVID-19 Delta Variant Potential To Squeeze Economic Growth

JAKARTA - The International Monetary Fund (IMF) revealed that the Delta variant of COVID-19 is very likely to erode economic growth in developing countries. This is because the implementation of stricter restrictions amid the spread of this new variant is considered to pose a risk of vulnerability to the sustainability of future economic recovery.

In its report, the IMF revised down the growth of developing countries that were quite influential, including India down 3 percent, Malaysia down 1.8 percent, Thailand down 0.5 percent, and Indonesia, which is believed to have fallen 0.4 percent.

In response to this, Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance, Febrio Kacaribu, said that Indonesia did not deny the presence of the highly contagious Delta variant overshadowing efforts to control the pandemic and economic recovery.

“We responded to this pressure by tightening activities or delaying the reopening in order to control the spike in cases that occurred. Other anticipatory steps taken are to continue to strengthen testing and accelerate vaccination," he said in an official statement, Wednesday, July 28.

According to Febrio, apart from the presence of the Delta variant, the global economy also needs to continue to be alert to the possibility of accelerating the normalization of US monetary policy as an implication of a rapid economic recovery, which could encourage a reversal of capital flows to the country.

"Indonesia will continue to take advantage of the still conducive global economic outlook, while continuing to be aware of the risks," he said.

For information, WHO reports that this variant has spread in 124 countries and has even become the dominant variant in various countries, such as Indonesia, England, Russia, Malaysia, Thailand, and South Africa.

In contrast to developing countries, the IMF predicts that the group of developed countries will experience an increase in projections supported by the expansion of reopening, high vaccination coverage, and massive stimulus.

Some of these countries are the United States, whose economic growth is estimated to increase by 0.6 percent from the previous target. Then, the euro zone countries rose 0.2 percent, as well as South Korea which rose 0.7 percent from the basic assumption.

Meanwhile, Indonesia itself believes that the value of gross domestic product (GDP) throughout 2021 will be able to grow in the range of 3.7 to 4.5 percent.