Indonesian Annual Economic Growth Target Achievable by Mid-2021
A 7% Indonesian annual economic growth target is well within attainable scope.
The second quarter of 2021 will see the Indonesian annual economic growth target reaching a predictive 7%. This is according to a recent statement from the Republic of Indonesia’s Financial Services Authority (Otoritas Jasa Keuangan or OJK). OJK attributes this to better credit distribution and increasing consumer demand.
An expression of confidence and optimism also comes from the President that Indonesia can beat the negative economic growth trend. This trend was seen emerging during the second quarter of 2020. After a previous quarter contraction to minus-0.74%, Indonesia remains upbeat for a 7% economic growth in the second quarter of 2021.
Details from OKJ’s Board of Commissioners highlight that credit distribution has been showing record high growth impetus. As of June 2021, the year-to-date increase of 1.83% facilitates the economy to reach the 7% growth prediction. This will allow Indonesia to emerge from recession and post its most robust growth in almost two decades.
An Increase in Community Mobility
One of the main reasons for the spike in economic activity is attributable to Indonesia’s lockdown procedures. During the early period of the second quarter of 2021, emergency public activity restrictions (PPKM) were not in force. These came into force only in early July, with PPKM levels going from 4 to 3, etc. Hence, the months of April to June saw an increase and expansion in economic activity.
Economic indicators such as an increase in community mobility, consumer demands, etc., were indicative of economic growth. Improvements were also in line with Indonesia’s national economic recovery rollout plans. It is the highest expansion rate since the last quarter of 2004.
However, a resurgence in COVID-19 active cases acted as s speedbump in the economic recovery pace. It brought community activity down to 5.2% from May 2021’s figures of 6.7%. Strategies to accelerate credit growth include expediting corporatization. There are also plans to digitalize support of economic recovery for micro, small and medium enterprises (MSMEs).
A Rallying of the Economy
Assurance that the Indonesian annual economic growth target will reach and sustain its 7% vector rests on several factors. One of these is a significant improvement in the Purchasing Managers Index in relation to the manufacturing industry. This economic indicator was recorded at 55.3 in the Index in May 2021.
Indonesia also needs a sustainable and stable rise in consumer confidence, retail sales, and exports. A surge in exports, especially commodity shipment, saw an increase of USD16.6 billion or 58% in May 2021. Along with government spending and rebound in investment, Indonesia will be able to maintain its momentum of growth.
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