The Indonesian Finance Minister Sri Mulyani Indrawati slashed the projected economic growth of 2020 to 2.3 percent during the coronavirus outbreak.
The finance minister has said that Indonesia has taken measures to prevent a financial crisis amid the coronavirus outbreak, stressing on a worst-case scenario of an economic decline this year as the country currency Indonesian Rupiah hits a record low.
The Finance Minister Sri Mulyani Indrawati said on Wednesday that the measures to help failing banks have been introduced to allow for early responses by all financial authorities as part of an emergency regulation that President Joko Widodo announced on Tuesday.
The Indonesian President Joko Widodo has signed a law to relax spending and to allow the budget deficit to widen, waiving a cap of a deficit of 3 percent of gross domestic product (GDP) for three years.
The president also introduced plans for 405 trillion rupiahs of additional spending to mitigate the effect of the outbreak in the country, which would expand the 2020 fiscal deficit to 5.07 percent of the GDP.
Mrs. Indrawati said in a press conference that earlier this year the government projected the economy will grow by 5.3 percent in 2020, but now the government re-evaluates it and expects the Indonesian economy to grow by 2.3 percent this year.
The finance minister also included the projection of the Indonesian currency rupiah to fall further to a range of between 17,000 to 20,000 to the US dollar, the weakest since the 1998 economic crisis.
However, Bank of Indonesia Governor Perry Wrjinoy later said that these scenarios are not an outlook but rather a baseline to evaluate the current situation, while he also stressed that the worst-case scenarios could possibly be avoided.
Mrs. Indrawati emphasized the new regulations as extraordinary measures and pledged authorities would adhere to careful governance.
Provisions include allowing the government to lend to the Indonesia Deposit Insurance Corporation, a government agency that insures bank deposits and saves failing banks, easing rules on Bank of Indonesia’s short-term liquidity lending and allowing the Financial Services Authority to restructure banks or even merge lenders if needed.
The new regulation also includes a tax cut for corporations and businesses to 22 percent effective immediately until 2021 and further cut to 20 percent starting in 2022.
Indonesia recorded none known cases of coronavirus in early March 2020 but the cases have spiked up to 1,528 with 136 deaths in early April 2020.
