Bank Indonesia Brings Bad News: The COVID-19 Delta Variant Makes Economic Growth Lower Than Before

Illustration. (Photo: Doc. Antara)

JAKARTA - Bank Indonesia (BI) said that domestic economic growth is believed to be lower than before after the spread of the COVID-19 delta variant.

BI Governor Perry Warjiyo said that spatially the decline in economic growth was smaller outside Java, especially in Sulawesi-Maluku-Papua (Sulampua), which was supported by strong export performance.

"With these developments, Bank Indonesia estimates that economic growth in the period throughout 2021 will be 3.5 percent to 4.3 percent from the previous projection of 4.1 percent to 5.1 percent", he said in a virtual press conference after the Board of Governors Meeting, Thursday, July 22.

Although in general, the central bank sees greater pressure in the second semester, Perry believes that in the first half the economy recorded growth, mainly driven by increased export performance, fiscal spending, and non-construction investment.

“The development of a number of early indicators in June 2021, such as retail sales and Indonesian migrant workers (PMI) indicates that the domestic economic recovery is still ongoing. In the third quarter of 2021, economic growth is expected to be lower in relation to the mobility restriction policies that must be taken to overcome the increasing spread of the COVID-19 delta variant", he said.

The BI boss also revealed that the decline in growth occurred mainly in household consumption due to limited mobility, in the midst of increasing social assistance stimulus by the government and continued strong export performance.

"In the fourth quarter of 2021, economic growth is expected to increase again, driven by increased mobility in line with the acceleration of vaccination and implementation of health protocols, continued policy stimulus, and continued improvement in export performance", he said.