JAKARTA: Indonesia’s finance minister on Friday raised the country’s crisis management protocol level to one notch below “crisis” and warned that if the Covid-19 outbreak persisted, economic growth could fall to between 0%-2.5%.
Sri Mulyani Indrawati said her baseline scenario was for GDP growth at above 4%, but that if the coronavirus outbreak lasted three to six months, global trade slumped and Indonesia went into lockdown, the result could be no growth.
Indonesia’s GDP grew 5.02% last year.
The central bank’s growth outlook for 2020 is 4.2%-4.6%. President Joko Widodo said this week he wasn’t considering any kind of lockdown.
Indrawati’s comment came as the rupiah fell as much as 1.9% to 16,200 a dollar, its weakest since June 1998 when the Asian financial crisis forced Suharto to step down.
The main stock index also touched its lowest in nearly seven years, while bond yields jumped.
“We’re raising the (crisis management protocol) level from ‘alert’ to ‘standby,’ so we can adjust our response,” Indrawati told an online news conference, referring to a protocol to reduce market volatility.
“We will conduct a number of actions to maintain financial market stability, despite heavy pressure,” she said, adding the measures would be the same as during the 2008 global financial crisis, though with some modification.
She did not explain what authorities might do. But the protocol covers authorities’ response to swings in government bond yields, the rupiah exchange rate, the main equity index and the proportion of foreign ownership in bonds, according to a finance ministry monthly newsletter in March.
The article said the government may start buying back bonds from the secondary market or postponing auctions, with the protocol’s ‘standby’ level the second to highest, just below ‘crisis.’
Bank Indonesia (BI) Governor Perry Warjiyo told the same news conference the central bank had pumped 300 tril rupiah (RM81.65 bil) into the money market and the banking system.
BI cut its benchmark rate for a second time on Thursday and announced market operations to help soften the blow on Southeast Asia’s largest economy.
The number of confirmed cases and deaths from Covid-19 has spiked in Indonesia less than three weeks since it reported its first patients. As of Friday, it had 369 reported cases and 32 deaths, according to a health ministry official.
A total of 62.3 tril rupiah in government spending will be shifted to finance the country’s Covid-19 response, Indrawati said, up from 17.17 tril rupiah previously announced. – March 20, 2020, Reuters
