AMRO’s 2020 Annual Consultation Report on Indonesia

The economy of Indonesia remains resilient despite the COVID-19 pandemic. A prompt recalibration of the policy mix and the enactment of large stimulus measures have provided timely and much-needed support to the affected households, businesses, and financial sector, as well as safeguarded macroeconomic and financial stability. Supportive policy synergy, together with the widespread availability of COVID-19 vaccines, is expected to underpin a rebound in growth in 2021.

A smooth exit from the extraordinary policy measures is necessary to avoid cliff effects and facilitate a full economic recovery post-pandemic. The phasing out of Bank Indonesia’s exceptional financing should be done in conjunction with a credible fiscal consolidation plan, particularly via raising tax revenue, when the pandemic is under control and the economy is on a firm footing.

In the longer-run, further efforts on financial market developments, as well as continued reforms in the areas of economic diversification, infrastructure and human capital development, and the digital economy will enhance Indonesia’s resilience against future shocks.

The report includes three thematic topics pertaining to Indonesia’s long-term growth: (i) E-money in Indonesia; (ii) Pandemic-related loan restructuring and impact on banks’ performance; and (iii) Debt sustainability analysis and medium-term fiscal projections.

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