Fitch expects Indonesia’s economy to shrink 2 percent this year due to the impact of the COVID-19 pandemic (Photo: Antara)Jakarta (VNA) – Credit ratings agency Fitch Ratings (Fitch) has forecast that Indonesia’s economic growth will contractby 2 percent in 2020, largely attributable to the impact of the COVID-19pandemic.
According to Fitch, the country’s economy will witness a rebound to 6.6 percentgrowth in 2021, partly driven by a low-base effect, and expects growth momentumto continue at 5.5 percent in 2022, supported in part by the government’srenewed focus on infrastructure development.
The Indonesia government has responded swiftly to the crisis with a broad rangeof relief measures to support households and companies, including small- andmedium-sized enterprises, it said.
Accordingly, total coronavirus-related government support amounted to 695trillion Rp (47.93 billion USD), or 4.4 percent of GDP, and included direct cashtransfers, provision of basic foods, guarantees and tax incentives.
Fitch believed the Indonesian government islikely to resume adhering to the 3 percent of GDP deficit ceiling by 2023, inline with its stated intention.
The agency rated, higher government spending and lower revenue due to theslowdown should cause the fiscal deficit to rise toaround 6.0 percent in 2020 from 2.2 percent in 2019.
Fitch expects the deficit to narrow to 5.0percent in 2021 and 3.5 percent in 2022, as most of the pandemic-relatedexpenditure should be temporary.
Meanwhile, the general government debt is forecast to rise to 36.7 percent ofGDP in 2020 from 30.6 percent of GDP in 2019, and to peak at 39.1 percent ofGDP in 2022./.
VNA
