## Indonesia – Economic Outlook and Policy Priorities (Asia‑Pacific Regional Seminar)

## Source details

**Canonical URL:** [Indonesia – Economic Outlook and Policy Priorities (Asia‑Pacific Regional Seminar)](https://www.imf.org/-/media/files/oap/oap-home/2021/asia-pacific-seminar-august-2021.pdf)

## Other formats

- [Markdown version](/-/media/files/oap/oap-home/2021/asia-pacific-seminar-august-2021.pdf.md)
- [Structured JSON version](/-/media/files/oap/oap-home/2021/asia-pacific-seminar-august-2021.pdf.json)

---

### COVID‑19 timeline and epidemiological impact
- First COVID‑19 case detected in Jakarta on March 1st, 2020.
- Key milestones:
  - Highest daily case 56,757 on July 15th, 2021.
  - #100k Death case recorded Aug 4th, 2021.
  - #1 Million case recorded Jan 26th, 2021.
  - #2 Million case recorded June 21st, 2021.
  - #4 Million case recorded Aug 24th, 2021.
  - #50k Death case recorded May 28th, 2021.
  - #100K case recorded July 27th, 2020.
- Policy actions tied to epidemiological developments:
  - Large scale restriction policy in Jakarta implemented April 2020.
  - Government introduced COVID task force and PEN in July 2020.
  - “Burden Sharing” scheme introduced June 2020; first burden sharing allocation in August 2020.
  - Clinical test for SINOVAC in August 2020; President Joko Widodo inoculated by SINOVAC in Jan 2021.
  - Local elections held in 9 provinces, 223 regencies and 37 cities in Dec 2020.
  - Q2‑2021: increased mobility during Eid period with tourism flows.

### Restriction policy, mobility, and economic transmission
- Current restriction levels (summarized by Level‑1 to Level‑4) determine work‑from‑office/house, retail capacity, dine‑in rules, and school/place‑of‑worship capacity (Level‑1 least restrictive; Level‑4 most restrictive). Key features preserved exactly as presented for each level.
- Restriction assignment based on:
  - Rate of transmission: number of confirmed cases, hospitalizations and deaths.
  - Health response system: positivity rate, tracing ability, and occupancy of beds in hospitals.
- Mobility and GDP dynamics presented in four periods:
  - Period A: Initial response; shock to mobility & GDP.
  - Period B: Adjusting to the pandemic; GDP gradually recovers.
  - Period C: Stable daily case; “artificial” new normal; increased mobility induces strong economic activity.
  - Period D: Delta Variant; lower mobility with restriction; delayed growth recovery?
- Provincial mobility trends highlighted for Indonesia, Jakarta, Bali (percent changes, averages of Retail/Transit/Work).

### Fiscal policy response and PEN program
- The National Economic Recovery Program (PEN) allocation:
  - 2020: IDR575.8 trillion (3.7 percent to GDP).
  - 2021: IDR744.8 trillion (4.6 percent to GDP).
- PEN program components (listed verbatim):
  - Health: Diagnostic, therapeutic, and vaccination.
  - Social Protection: Assistance for the bottom 40 and vulnerable group (conditional cash transfer, non‑cash food assistance, etc).
  - Priority Programs: Labor intensive, tourism, food security, ICT.
  - SME and Corporate Supports: Govt assistance for microenterprises, interest subsidy, fund placement.
  - Business Incentives: Tax incentives (income tax borne, MSME final income tax borne, luxury tax on vehicles borne).
- PEN realization reported as of August 13, 2021 (PEN Budget and PEN Realization in percent of GDP displayed).

### Monetary policy, liquidity, and central bank interventions
- Bank Indonesia (BI) policy and operations:
  - BI implemented a “triple intervention strategy” including purchase of government bond in primary market.
  - BI policy rate (7‑day Reverse Repo Rate) and BI band evolution shown over Jan‑20 to Jul‑21.
- BI bond purchase in primary market (cumulative issuance by quarter, IDR trillion): quarterly figures shown (e.g., Q2 2020: 26; Q3 2020: 48; Q4 2020: 76; Q1 2021: 65; Q2 2021: 116; Q3* 2021: 132; Q3* 2021 cumulative noted as 398 — note indicates *up to August 16, 2021).
- FX market and liquidity operations:
  - FX Swap and DNDF series (in US$ million) and Spot/Forward exchange rate on RHS presented.
  - Liquidity injection and absorption by BI shown across instruments (IDR Term Deposit, BI Certificate, Reverse Repo, Deposit Facility, IDR Term Repo, Govt. Bond, FX Swap, Lending Facility) with net flows.

### Financial sector flexibility, credit, and risks
- Regulatory forbearance and extensions:
  - Loan restructuring policy extended:
    - Banks: until March 31, 2022.
    - NBFI: until April 17, 2022.
  - Risk weight reductions noted for house‑collateralized loans (in accordance with LTV policy) and vehicle loans receiving luxury sales tax relaxation (PPnBM).
- Credit and asset quality:
  - Loan‑at‑Risk and NPL series displayed (quarterly data).
  - Credit growth trajectory by purpose: working capital, investment, consumption, total credit (percent yoy time series).
  - Credit growth remained slow; risk indicators suggest rising vulnerabilities.
- Banking liquidity and balance sheet indicators:
  - Banks’ liquid assets as percent of Rupiah deposits (series of instruments including Deposit Facility (FASBI), Excess Reserves, BI Certificate, Rev Repos, Govt. Bonds (outright), BI TDs, Term Repo, FX Swap).
  - Capital Adequacy Ratio (CAR) of conventional banks and loan to private sector growth vs NPL series.

### Macro outcomes: growth, trade, capital flows, and markets
- Investment and public capital expenditure:
  - Capital goods imports and domestic cement sales (% yoy) and GFCF (% yoy) series indicate investment began to recover in Q2; government capital expenditure growth (% yoy) series presented.
- Trade projections (from WEO database, April 2021):
  - Volume of exports and imports of goods and services (% change, yoy) for ASEAN‑5, Indonesia, World with projection through 2025.
- Real exports and imports (OG and Non‑OG, % change, yoy) series for Indonesia.
- Capital flows, current account, and currency:
  - Balance of Payment profile: Current Account, Financial and Capital Account, BOP (% GDP) time series.
  - Core inflation & Rupiah/USD exchange rate series (year‑on‑year percent change; up = depreciation).
  - Conclusion: Capital flows and rupiah have been relatively stable.
- Asset markets:
  - Jakarta Composite Index (rupiah and US$) and MSCI Asia Ex. Japan (US$) indexed series (Jan 3, 2017 = 100).
  - Sovereign CDS premium series for selected countries: so far little evidence of repricing Indonesian assets.

### Vaccination rollout and heterogeneity across regions
- National vaccination progress (daily vaccinations, 7d AVG in millions) series from Feb‑21 to Aug‑21.
- Regional vaccination rates (percent of target / percent of population):
  - National Level: 1st dose: 27.2%; 2nd dose: 15%.
  - Jakarta: 1st dose: 111.4%; 2nd dose: 57.7%.
  - Bali: 1st dose: 91.9%; 2nd dose: 47.2%.
  - Riau Islands: 1st dose: 72.7%; 2nd dose: 27.3%.
  - West Java: 1st dose: 21.6%; 2nd dose: 11.3%.
  - Aceh: 1st dose: 17.9%; 2nd dose: 9.5%.
  - Central Kalimantan: 1st dose: 23.8%; 2nd dose: 15.5%.
  - West Kalimantan: 1st dose: 15.8%; 2nd dose: 10.3%.
  - Papua: 1st dose: 15.7%; 2nd dose: 10.3%.
- Data up to Aug 27 (daily vaccination and regional rates).

### Policy priorities and recommendations
- When to loosen restrictions:
  - Restrictions have clear economic impact; letting the virus spread has confidence costs that are less clear.
  - Countries that waited until cases were 80 percent off peak fared better than those that opened faster.
  - With the Delta variant, both rise and fall of cases is faster than previous waves; targeting is more difficult.
- Fiscal strategy:
  - Strengthen spending through PEN; credible and accountable management of deficits.
  - Serious revenue reform needed to underpin credible fiscal policy and to get budget deficit back to 3 percent (targeting deficit normalization pathways shown).
  - Tax revenue and budget deficit paths presented with lower and upper limits (time series 2020–2025).
- Monetary and exit strategy for BI:
  - New normal in monetary policy: exit strategy for BI purchases of government debt.
  - Gradually reduce other asset purchases.
  - Raise rates as inflation circumstances change.
- Financial sector and corporate resilience:
  - Crisis management and resolution framework needs updating to prepare for financial sector stresses while maintaining credit flow.
  - Banks should objectively assess creditworthiness and prepare capital plans as liquidity normalizes.
  - Continued development of financial markets, long‑term funding, and money market.
  - Better regulation, supervision, and risk management at firm level should precede compensation schemes to protect consumers and limit moral hazard.
- Structural priorities:
  - Deepen pension, insurance, and capital markets—Indonesia’s insurance and pension markets among the smallest in EM (percent to GDP comparisons shown).
  - Promote broader adoption of digital payments; invest in digital‑friendly infrastructure and education; encourage use of digital financial services in government transactions.
  - Strengthen regulation and interagency cooperation to manage digitalization challenges.

---


_Source: https://www.imf.org/-/media/files/oap/oap-home/2021/asia-pacific-seminar-august-2021.pdf_