Maintaining Growth Momentum With Discipline
Based on the expenditure components in the GDP, household spending grew 5.93 percent, while exports rose 31.78 percent, imports 31.22 percent, investment 7.54 percent and government spending 8.06 percent.
The national economy grew 7.07 percent year-on-year in the second quarter of 2021. Discipline in implementing health protocols and the vaccination program will determine future economic growth.
JAKARTA, KOMPAS — Encouraging economic data in the second quarter of 2021 marked the return of the economy to a positive growth following a contraction in the same period last year. However, the recovery trend will still be vulnerable to disruptions if the COVID-19 transmission cannot be properly controlled.
Statistics Indonesia (BPS) reported that the national economy grew 7.07 percent annually in the second quarter of 2021 with a gross domestic product (GDP) at current prices of Rp 4.175.8 quadrillion (US$291 billion). Based on the expenditure components in the GDP, household spending grew 5.93 percent, while exports rose 31.78 percent, imports 31.22 percent, investment 7.54 percent and government spending 8.06 percent.
> Resurgence of Covid-19 Pandemic
> It’s Time to Empathize with the People
An economist at the School of Economics and Business of the University of Indonesia (UI), Chatib Basri, said on Thursday (5/8/2021) that the high economic growth in the second quarter of 2021 was partly due to the low base in the same period last year, during which the economy suffered a 5.32 percent contraction. However, the economic data in the second quarter also shows an improvement in the economy, in line with the encouraging performances of a number of growth-supporting sectors.
Car sales increased sharply due to the government’s policy to the sales tax on luxury goods (PPnBM) in the second quarter. Exports and imports also grew significantly on the back of rising commodity prices and the economic recovery in a number of countries.
“Household spending, the largest contributor to GDP with a 57.23 percent share, also grew on the back of the revival of community mobility. Improvements in export-import activities and household spending also helped fuel the growth of the manufacturing industry and investment," Chatib said in a virtual dialogue held by the Trade Ministry.
However, the easing of the mobility restrictions can lead to an increase in COVID-19 infections.
He added that one of the important things that needed to be observed is the mobility of the people, which has often become a dilemma of the government. When people\'s mobility is relaxed, economic activities will increase. However, the easing of the mobility restrictions can lead to an increase in COVID-19 infections.
"What we should resolve is how to encourage the economic growth, but at the same time keep COVID-19 transmissions under control. The key is to be disciplined in implementing health protocols and accelerating vaccinations," he said.
The Indonesian people’s discipline in following health protocols, he pointed out, was not as good as in Singapore or even in Vietnam. Meanwhile, the coverage of the vaccination program is still uneven because it is hampered by a number of factors, including a lack of the vaccine supplies.
Finance Minister Sri Mulyani Indrawati said during a separate press conference that the momentum of economic recovery could be maintained only if COVID-19 transmissions could be controlled, a condition that can allow the easing of restrictions and the reopening of economic activities.
She added that the economy was projected to grow between 4 percent and 5.7 percent in the third quarter of 2021. This optimism is based on the belief that the recovery momentum in the second quarter of 2021 can be maintained. Sri Mulyani added that the recovery trend would continue in the third quarter, partly due to the rise in the household spending as a result of expanded social protection programs. Meanwhile, the realization of the funds allocated for the National Economic Recovery (PEN) program reached Rp 305.5 trillion as of 30 July, 2021. The figure accounts for 41.02 percent of this year\'s PEN ceiling of Rp 744.75 trillion.
> Prevent Huge Spikes in COVID-19 Cases
> Contagion Worsens, Strengthen Health Services
Meanwhile, Coordinating Economic Affairs Minister Airlangga Hartarto said he believed that the economic growth in the fourth quarter of 2021 could exceed 5 percent, as the number of new COVID-19 cases was projected to drop drastically at the end of September.
"In the third quarter of 2021, we are still figuring out when we will revive community mobility because in August, we are still implementing PPKM [social activity restrictions]," he said.
The chairman of the Indonesian Chamber of Commerce and Industry (Kadin), Arsjad Rasjid, who took part in the dialogue at the Trade Ministry, said the government needed to fully open up essential industries, especially those that are export-oriented, so that the wheels of the economy can still turn despite the mobility restrictions. In order to be able to fully operate, those industries must be required to strictly follow health protocols and vaccinate their workers, he added.
"Retail can be fully opened as long as all retail workers in malls have been vaccinated. Visitors who are allowed to enter the mall must also be vaccinated. They must show their vaccination cards," he said.
The encouraging data on economic growth during the second quarter of 2021 also fueled trading activities in the Indonesian Stock Exchange (IDX). However, a number of analysts have estimated that the economy would still face challenges in the third quarter of 2021.
The Jakarta Composite Index (JCI), the main price benchmark at the IDX, rose 46.38 points, or 0.75 percent, to 6,205.41 at the close of the trading on Thursday.
"Whether growth will be maintained depends on how the government handles COVID-19 and vaccinations," Mirae Asset Sekuritas’s Investment information head, Nafan Aji Gusta, said during the Mirae Asset Day event.
ANZ Bank economist Krystal Tan and ANZ Southeast Asia economist Sanjay Mathur warned in their research that the increase in COVID-19 infections and community mobility restrictions since early July can slow economic growth in the third quarter of 2021.
"In general, we cut our 2021 growth forecast from 4 percent to 3.8 percent," ANZ forecasts.
In order to maintain the growth momentum, household and government expenditures should be further increased, he added.
On a separate occasion, the chairman of the Financial Services Authority (OJK), Wimboh Santoso, said the high economic growth recorded in the second quarter of 2021 reflected the positive signs of the country’s economic performances. In order to maintain the growth momentum, household and government expenditures should be further increased, he added.
The head of Bank Indonesia’s communications department, Erwin Haryono, also shared a similar view, saying that the positive economic growth in the second quarter had been supported by the increase in demand and business activities in all economic sectors. (HEN/DIM/JOE/BKY)
(This article was translated by Hendarsyah Tarmizi).