## IMF Executive Board Concludes 2020 Article IV Consultation with Indonesia _IMF News, March 3, 2021_ ## Source details **Canonical URL:** [IMF Executive Board Concludes 2020 Article IV Consultation with Indonesia](https://www.imf.org/en/news/articles/2021/03/01/pr2154-indonesia-imf-executive-board-concludes-2020-article-iv-consultation) ## Other formats - [Markdown version](/en/news/articles/2021/03/01/pr2154-indonesia-imf-executive-board-concludes-2020-article-iv-consultation/index.md) - [Structured JSON version](/en/news/articles/2021/03/01/pr2154-indonesia-imf-executive-board-concludes-2020-article-iv-consultation/index.json) - [Bundle manifest](/en/news/articles/2021/03/01/pr2154-indonesia-imf-executive-board-concludes-2020-article-iv-consultation/bundle-manifest.json) ## Bibliographic details - Published: March 3, 2021 --- ### Economic developments in 2020 - Real GDP increased by 3.2 percent in 2020:Q3 (q/q, s.a.) and is expected to have contracted by a modest 1.9 percent in 2020 as a whole. (Note: a footnote states the actual real GDP growth rate in 2020 was -2.1 percent.) - Headline inflation reached 1.7 percent (y/y) at end‑2020, below the Bank Indonesia’s target band (3±1 percent). - Current account deficit is expected to have narrowed to 0.5 percent of GDP in 2020, mostly due to a relatively sharper contraction of imports. - The Indonesian economy is gradually recovering driven by a bold, comprehensive, and coordinated policy response to the COVID‑19 pandemic. ### Outlook and key projections - Real GDP projections: - 2021: 4.8 percent - 2022: 6 percent - Inflation projection: - Rise gradually to 3 percent (y/y) at end‑2021. - Current account projection: - 2021: widen to 1.5 percent of GDP. - Credit growth: - Expected to pick up in 2021 with stronger activity, albeit remaining below nominal GDP growth because of increased risks to asset quality and bank profitability. - Risks to the outlook: - Upside: Early widespread vaccination. - Downside: Delays in vaccination leading to a more protracted pandemic; larger-than-expected macro-financial fallout; slow improvement in credit conditions. - Policy measures cited as supporting the outlook: - Increased public investment. - COVID‑19 vaccine distribution plans. - Improved global economic and financial conditions. ### Executive Board assessment and guidance - Commendations and observations: - Authorities’ containment measures and supportive macroeconomic policies cushioned the pandemic’s economic impact. - Indonesia’s strong fundamentals and prudent macroeconomic policy track record contributed to resilience. - Fiscal policy: - Directors commended the authorities’ commitment to return to the statutory budget deficit ceiling by 2023. - Emphasized unwinding exceptional measures in a balanced manner. - Stressed need to underpin fiscal rules with a medium-term fiscal strategy that includes revenue measures. - Higher government revenues would help create space to boost development spending and support sustainable and inclusive growth. - Capacity building support will be crucial. - Monetary policy and central bank operations: - Maintaining an accommodative monetary policy stance, contingent on the inflation outlook, is appropriate. - Authorities pursue accommodation via lower policy interest rates and government bond purchases by Bank Indonesia in current exceptional circumstances. - Directors welcomed Bank Indonesia’s plan to conduct bond purchases in 2021 only as a last resort under the market mechanism and suggested clarifying last-resort criteria to enhance the monetary policy framework and safeguard operational independence. - Noted the role of exchange rate flexibility in absorbing shocks. - Financial sector: - Banking system remains stable; continued monitoring of bank asset quality is warranted. - Proactive loan loss provisioning is critical for banks’ ability to weather deterioration in asset quality. - Additional targeted policy steps may be necessary if bank lending to the private sector does not rebound. - Importance of continuing to upgrade crisis management and resolution frameworks. - Structural reforms: - Directors welcomed the omnibus bill on job creation and plans to close infrastructure gaps. - Encouraged sustaining reform momentum with focus on: - Developing a medium-term government revenue strategy. - Financial deepening and digitalization. - Fostering a greener economy and tackling challenges related to climate change. ### Selected economic indicators (highlights and exact figures) - Real GDP (percent change): 2016: 5.0; 2017: 5.1; 2018: 5.2; 2019: -1.9; 2020 1/: 4.8 (Est.); 2021 Proj.: 4.8 - Note: Table shows series including domestic demand components and discrepancies due to data timing; footnote 1/ states based on data as of January 29, 2021 and does not include national accounts data for 2020:Q4 released on February 5, 2021. - Gross investment (in percent of GDP): 2016: 33.9; 2017: 33.7; 2018: 34.6; 2019: 33.8; 2020: 32.5; 2021: 32.7 - Gross national saving (in percent of GDP): 2016: 32.0; 2017: 32.1; 2018: 31.6; 2019: 31.1; 2020: 31.2 - Consumer prices (end period, 12-month percent change): 2016: 3.0; 2017: 3.6; 2018: 2.6; 2019: 1.7; 2020: (end‑2020) 1.7 - General government revenue (percent of GDP): 2016: 14.3; 2017: 14.1; 2018: 14.9; 2019: 14.2; 2020: 12.1 - General government expenditure (percent of GDP): 2016: 16.8; 2017: 16.6; 2018: 16.4; 2019: 17.8; 2020: 18.0 - General government balance (percent of GDP): 2016: -1.8; 2017: -2.2; 2018: -5.7; 2019: -5.9; 2020: -3.7 - Primary balance (percent of GDP): 2016: -1.0; 2017: -0.9; 2018: 0.0; 2019: -0.5; 2020: -3.7; 2021: -4.0 - General government debt (percent of GDP): 2016: 28.0; 2017: 29.4; 2018: 30.4; 2019: 30.6; 2020: 35.7; 2021: 40.1 - Rupiah M2 (12-month percent change; end of period): 2016: 10.0; 2017: 8.3; 2018: 6.3; 2019: 6.5; 2020: 11.5; 2021: 7.0 - Claims on private sector (12-month percent change; end of period): 2016: 7.7; 2017: 7.2; 2018: 10.3; 2019: 5.8; 2020: 5.6 - Current account balance (in billions of U.S. dollars): 2016: -17.0; 2017: -16.2; 2018: -30.6; 2019: -30.4; 2020: -5.5; 2021: -17.4 - Current account (in percent of GDP): 2016: -1.6; 2017: -2.9; 2018: -2.7; 2019: -1.5; 2020: -0.5 (expected) - Trade balance (in billions of U.S. dollars): 2016: 15.3; 2017: 18.8; 2018: -0.2; 2019: 23.4; 2020: 20.3 - Gross reserves (in billions of U.S. dollars, end period): 2016: 116.4; 2017: 130.2; 2018: 120.7; 2019: 129.2; 2020: 135.9; 2021: 152.3 - Gross reserves (in months of prospective imports of goods and services): 2016: 7.6; 2017: 7.1; 2018: 9.9; 2019: 8.1 - Total external debt (in billions of U.S. dollars): 2016: 320.0; 2017: 352.5; 2018: 375.4; 2019: 403.5; 2020: 416.6; 2021: 446.9 - Total external debt (percent of GDP): 2016: 34.3; 2017: 34.7; 2018: 36.0; 2019: 36.1; 2020: 38.3; 2021: 38.5 - Rupiah per U.S. dollar (period average): 2016: 13,306; 2017: 13,383; 2018: 14,231; 2019: 14,140; 2020: 14,541; 2021: 14,541 - Rupiah per U.S. dollar (end of period): 2016: 13,473; 2017: 13,568; 2018: 14,390; 2019: 13,866; 2020: 14,050 *Press Release No. 21/54, March 2, 2021.* --- ## References - [https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg) - [The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx) - [Indonesia and the IMF](http://www.imf.org/external/country/IDN/index.htm) - [IMF Policy Advice -- A Factsheet](https://www.imf.org/en/about/factsheets/imf-surveillance) - [Press Releases](https://www.imf.org/en/news/searchnews) - [PRESS CENTER](http://presscenter.imf.org/) - [http://www.IMF.org/external/np/sec/misc/qualifiers.htm](http://www.imf.org/external/np/sec/misc/qualifiers.htm) - [https://www.imf.org/en/home](https://www.imf.org/en/home) _Source: https://www.imf.org/en/news/articles/2021/03/01/pr2154-indonesia-imf-executive-board-concludes-2020-article-iv-consultation_