INDONESIA’S Government has decided to extend the implementation period for Level-4 community activity restrictions (PPKM) until August 2, 2021. The extension of the implementation period for community mobility restrictions will place great pressure on the business world and the economy.
According to the Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal, said it is estimated that the continued strict restrictions on community mobility have the potential to reduce the government’s economic growth projection. As is known, the government has lowered the projected economic growth rate for 2021 to be in the range of 3.7% to 4.5%.
“Bank Indonesia (BI) has also lowered its 2021 economic growth projection to 3.5% to 4.3%, from the previous projection of 4.1% to 5.1%. The longer PPKM is implemented, the more pressing the business world and the economy will be. The projection decline could happen again,” he said.
Faisal also estimates that this year’s economy will only grow at around 3% if you look at the current development of economic indicators. However, economic growth in the third quarter of 2021 is expected to continue to experience positive growth due to the effects of a low base in the third quarter of 2020.
“Therefore, the implementation of PPKM Level 1-4 is expected to suppress the increase in COVID-19 cases and really control the spread of COVID-19. If PPKM is successful, it is also hoped that the tightening entrepreneurs will have an impact on reducing the pandemic, so that it will save the economy in the long term,” he explained.
Faisal added that the continued tightening of community mobility will also increase the fiscal burden because the government must meet the economic needs of the community, especially those affected through social assistance and various incentives.
“What concerns me is whether the assistance is appropriate or not. The government can refocus and if it is reallocated properly, it is hoped that the budget deficit will not widen,” he remarked.
Meanwhile, BCA Chief Economist David Sumual estimates that the economy in the third quarter of 2021 will grow below 4%. Although community mobility is tightened, it is not as severe as compared to the large-scale social restrictions (PSBB) in 2020.
“But of course, there will be an impact on spending on durable goods. So, there must be a correction for the third quarter. The second quarter will not be significantly affected, but the third quarter will be below expectations,” he noted.
He said export performance would be the driver of economic growth in the third quarter of 2021. This is reflected in the trend of the trade surplus that will continue until June 2021. However, according to him, the projection of economic growth will also depend on how long the tight mobility tightening will last.
“Demand for exports is still relatively good, but the problem is that our economy is supported a lot from consumption. How long does the PPKM take,” he concluded. [bisnis.com/photo special]