Indonesia Should Not Withdraw its Economic Stimulus Too Soon: Former Finance Minister

Indonesia reported an economic contraction of 2.07% for 2020, its first full-year contraction since 1998, fuelled by a slump in consumption and investment. Following the large-scale stimulus programmes introduced into Indonesia, President Joko Widodo has set a target of restoring the fiscal deficit to 3.0% of gross domestic product (GDP) by 2023, as stated in media reports.

Indonesia’s Finance Minister, Sri Mulyani Indrawati is also on board, remaining optimistic of achieving 5.0% GDP growth for 2021, amidst a narrowing window for interest rate cuts and weak tax revenue.

Why it matters?

Indonesia’s fiscal deficit is forecast at 5.7% for 2021 (compared to a deficit of 6.1% in 2020), even though the Finance Minister doubled the 2021...