Indonesia Daily Focus November 26, 2020
2021 Economic Outlook - Tough road to recovery
2020 global economic review
So
far, a series of data shows that COVID-19 has indeed brought more
devastating economic impacts on various economies than previously
thought. Due to the easing of social distancing measures, global economy
is en route to recovery, albeit gradually.
2021 global economic outlook
Entering
2021, we are expecting a V-shape recovery in the global economy, based
on several fundamental reasons. For example, policy responses, from both
central banks and central governments, have been more accommodating
compared to what we saw during the GFC.
We
believe that Biden’s presidency would be positive for the global
economy and riskier assets in general. Although lots of COVID-19 vaccine
candidates are already entering the phase 3 in their development, there
are downside risks regarding the race to find an effective vaccine.
2020 Indonesia’s economic review
Even
before COVID-19 hit, we observed that Indonesian people have been
defensive, as retail sales have been declining although consumer
confidence remained relatively high. In 9M20, Indonesia GDP contracted
by 2.03% YoY, as household consumption fell by 2.29% YoY. Of a note,
3Q20 marks the start of a recession, which we expect will last until
4Q20.
2021 Indonesia’s economic outlook
To
make sure that Indonesia will enjoy a V-shape recovery, the government
needs to support micro-small businesses, along with confidence and
purchasing power of middle-low income households, to be in a relatively
good position; so far, that’s not happening.
A
draft bill targeting the independence of BI, the ratification of
Omnibus Law on job creation, uncertainties regarding massive
vaccination, and also tepid growth of provincial minimum wage are other
downside risks clouding Indonesia’s economic recovery in 2021.
Due
to lots of downside risks clouding Indonesia’s economic prospect in
2021, we are projecting Indonesia’s economy to improve merely by 4.15%,
implying a U-shape recovery.
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