The economy in the third quarter of 2020 improved, but the costs were high

ILLUSTRATION. Minister of Finance Sri Mulyani

Reporter: Yusuf Imam Santoso | Editor: Khomarul Hidayat

KONTAN.CO.ID – JAKARTA. Minister of Finance (Menkeu) Sri Mulyani Indrawati said Indonesia’s economy in the third quarter of 2020 improved compared to the previous quarter. However, this achievement comes with the consequence of higher costs, namely an enlarging budget deficit.

Data from the State Budget (APBN) shows that during January-September 2020 the budget deficit reached IDR 687.5 trillion. This budget deficit is equivalent to 4.16% of Indonesia’s gross domestic product (GDP). When compared to the realization in the same period in 2019, namely IDR 252.41 trillion, the January-September 2020 deficit grew 170.2%.

With this high cost, the Minister of Finance predicts that the economy in July-September 2020 will be in the range of minus 2.9% to minus 1%. The hope is that it will be better than the realization of economic growth in April-June 2020 which contracted by 5.32%.

“The third quarter is better than the second quarter. Third quarter is back recovery, the stabilization function of the APBN together with others to counter the blows demand and supply, “Said Sri Mulyani in the 2020 National Symposium on State Finance (SNKN), Wednesday (4/11).

Also Read: Economists predict that Indonesia’s economy in the fourth quarter of 2020 is still minus

It is expected that the economic growth in 2020 will be between 1.7% to minus 0.6%. So that in order to boost the economy in the remainder of this year, the government is committed to using its fiscal policies, including accelerating spending.

“To maintain the economy and the state budget, we use fixed instruments and even together with Bank Indonesia (BI) with monetary policies and the policies of the Financial Services Authority (OJK). It is used to pump the economy upward, “said Sri Mulyani.

Despite feeling that it has been optimal in handling Covid-19 in terms of health, social, economic and financial sectors, it seems that the government has not been able to confirm the direction of economic recovery going forward. Even though in the second semester of 2020, a recovery is predicted.

Because, said Sri Mulyani, the movement for economic recovery, both Vshape, W shape, and U shape, will depend on the handling of the Covid-19 pandemic. This is happening in Western countries which were originally expected to experience a V shape, but may now be moving differently due to the second wave of the pandemic.