THE World Bank projects the economy in Indonesia will shrink 3.5 per cent, should the large-scale social restrictions (PSBB), imposed because of the Covid-19 pandemic, last for four months.
World Bank senior economist for Indonesia Ralph Van Doorn said under its baseline scenario, the nation's economy was expected to grow zero per cent compared with 5.02 per cent last year, according to The Jakarta Post.
"This (the baseline scenario) also takes into account a severe global economic slowdown and a very big drop in commodity prices, all of which will have an effect on Indonesia's economy," Van Doorn said.
"We expect private consumption to slow down due to job losses and a decline in consumer confidence.
"We also expect a slowdown in investment growth because of weaker economic activity and lower commodity prices," he said in a conference that was live-streamed on Tuesday.
Indonesia's economy grew 2.97 per cent in the first quarter, the weakest since 2001, while household consumption expanded just 2.84 per cent year-on-year (YOY) from 5.01 per cent during the same period last year.
The government's worst-case scenario sees the economy contracting 0.4 per cent this year.
Fitch Solutions in its research on May 6 projected private consumption to contract 1.5 per cent this year and the economy to shrink 1.3 per cent.
Four provinces and 11 regencies and cities nationwide had implemented PSBB as of Tuesday since Indonesia's outbreak epicentre here started applying the measure on April 10, forcing offices, factories and retail shops to close and limiting people's movement.
The government is pushing ahead to reopen the economy to prevent further weakening by easing restrictions in areas, where infection rates are under control, allowing malls and restaurants to reopen with strict health protocols, despite a surge in coronavirus infections nationwide.
The Finance ministry's Fiscal Policy Agency director for macroeconomic policy Hidayat Amir said the government's decision to reopen the economy was aimed at preventing massive bankruptcy and speeding up the economic recovery process after the threat had subsided.
"Economic recovery may take place in the third and fourth quarters.
"We want businesses to survive and prevent massive job losses," he said at the same media conference.
Finance Minister Sri Mulyani Indrawati recently projected that 1.89 million to 4.89 million Indonesians would become poor as a result of the pandemic, while three million to 5.23 million would lose their jobs.
The government is rolling out a US$44.3 billion economic recovery stimulus package to strengthen its safety net programmes, as well as to provide cash injections to state-owned enterprises, and subsidised loan interest for micro and small- and medium-scale enterprises.