Institute for Research on Economics and Society – Faculty of Economics and Business – University of Indonesia

MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook, Quarter II-2020

Cases of transmission of the Covid-19 pandemic in Indonesia have increased drastically, reaching more than 2.400 sufferers with the spread becoming increasingly widespread. The existence of a pandemic certainly poses a major threat, both to people's lives and the Indonesian economy. Economic weakening in both the real and financial sectors cannot be avoided. Amidst the risk of significant disruption to domestic economic activity, the government needs a large-scale fiscal policy strategy with fast and targeted distribution. So far, the government has issued stimulus with two focuses. In the short term focus, the government has attempted to increase the health budget and accelerate the realization of social assistance. Compared to several other affected countries, the value of the health budget in Indonesia is relatively larger, namely around 0,5% of GDP. With a long-term focus, the government has prepared a strategy to encourage economic activity through several incentives, such as tax incentives and credit relaxation. To date, the fiscal stimulus package has reached 2,5% of GDP. This expenditure is relatively high compared to several other affected countries.

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