VOI - Voice of Indonesia | RRI - Radio Republik Indonesia

Indonesia’s economic growth is likely to dip below 4 percent in the third quarter in the wake of the emergency restrictions in Java and Bali, Center of Reform on Economics (CORE) economist Yusuf Rendy has forecast.

"Third-quarter growth will most likely be far below second-quarter growth. We predict the economy will grow 4 percent in the second quarter. The growth will be lower in the third quarter," he said here on Monday.

The emergency public activity restrictions (PPKM) will no doubt restrict public activity and consumption, which will later have an impact on the national economic performance, he observed.

"Public consumption constitutes the biggest component of the GDP (national gross domestic product). So, when it is restricted, it will more or less affect economic performance," he elaborated.

Low economic performance will also result from the higher number of COVID-19 cases in provinces which contribute significantly to national economic growth, such as Jakarta, West Java, and Central Java, he said.

"Since the economy of the provinces will be disrupted, I think the national economy will be affected accordingly," he predicted.

Investment will also be affected by the enforcement of the emergency PPKM, he added.

Low public consumption in provinces with a higher number of COVID-19 cases will prompt companies to reduce their production capacity, he pointed out.

"That is what the government must anticipate, including preparing social assistance and other assistance that will at least alleviate the burden of the community during the emergency PPKM," he advised.

The government has estimated 3.1-3.3 percent year-on-year economic growth for the first half of 2021, based on a projected return of the economic growth rate to 7 percent in the second quarter after remaining in the negative territory over the last four quarters.

During a press conference after a plenary cabinet session in Jakarta, Monday, Finance Minister Sri Mulyani Indrawati highlighted that the government still expects the gross domestic product growth in the second quarter to reach 7 percent year on year as the impact of the emergency PPKM will likely be felt in the third and fourth quarters of this year.

“In the first quarter, economic growth was recorded at minus 0.7 percent. In the second quarter, we estimate economic growth at 7 percent; so realization in the first semester of 2021 is at 3.1-3.3 percent," she noted.

Indrawati said she believes that the impact of emergency PPKM will be felt in the third and fourth quarters of this year.

If the government's target to reduce the COVID-19 transmission rate is effectively realized, then community activities can likely recover by August, 2021 owing to relaxation of restrictions on community mobility, she said. If that occurs, economic growth in the third quarter of 2021 could exceed 4 percent, she predicted.

"However, if the extended restrictions due to COVID-19 are high, then the third-quarter economic growth could decrease by around 4 percent. This is something to watch out for,” the former World Bank executive director cautioned. (Antaranews)