JAKARTA - Indonesia’s handling of the coronavirus (COVID-19) outbreak has been slower compared to other Southeast Asian countries despite coordinated economic and financial policies, said Moody’s Investors Service.
“Indonesia's response to contain the coronavirus outbreak has lagged some other countries in the region. But its policies to limit the related economic and financial shock have been introduced in a relatively coordinated manner,” the credit rating agency wrote in a research note as quoted by The Jakarta Post, Friday (3/4).
In addition, Moody’s said that an unprecedented increase in the deficit ceiling would enable more fiscal headroom, although how the government plans to use its additional budget would determine its effectiveness to support domestic demand.
Moody’s projects Indonesia’s economic growth to slow to 3% this year, the lowest rate since the 1998 Asian financial crisis, with an expected rebound to 4.3% in 2021.
“Although growth in the first quarter will only slow modestly, partial shutdowns across Jakarta and other parts of Java—the epicentre of Indonesia's economic activity—indicate that the deceleration will be relatively rapid,” said Moody’s Vice President Anushka Shah.
“Meanwhile, the 20% drop in the rupiah against the dollar since early February and the spike in bond yields will have economy-wide effects, particularly if prolonged.” (MS)