2021 has been a turbulent year for Indonesia’s economy. After successfully pulled out of recession in the second quarter of this year, the country was hit by the merciless force of the COVID-19’s Delta variant outbreak. The economic impact was devastating.
Amid the Delta variant outbreak in July to August, authorities imposed a nation-wide emergency public mobility restriction (PPKM) to curb the infection. People were instructed to stay home and it effectively shut most businesses, dealing a further blow to the country’s struggling MSMEs. Domestic consumption and public activities declined, compared to the same period last year. As a result, Indonesia’s economic growth in the third quarter slowed down to only 3.51 percent.
Furthermore, the Ministry of Investment/BKPM reported a decline in the foreign direct investment (FDI) in the July to September period. It was down 2.7 percent to Rp103.2 trillion in the third quarter from a year earlier. The pandemic outbreak wreak havoc on the rapid annual growth of 19.6 percent seen on previous quarter. Fortunately, since October 2021, the COVID-19 cases have been steadily declining.
Bahlil Lahadalia, the Minister of Investment/Chairman of BKPM stated that the decline was largely because many skilled workers from abroad could not come into Indonesia to work on their respective projects because of PPKM. The flow of import and export goods were also disrupted. Despite the challenge, Indonesia’s FDI in the third quarter was up 3.7 percent from 2020, amounted to Rp216.7 trillion.
By October, the situation has started to look up. Due to the admirable fortitude of Indonesia’s frontline health workers, strict health protocols and aggressive vaccination programs, the outbreak was contained. The annual direct investment target of Rp659.4 trillion, as outlined by President Joko Widodo had been met. With a few months left, Lahadalia is
still optimist that Indonesia could achieve 5 percent YoY economic growth in the fourth quarter of 2021 as long the Rp900 trillion target is met.
To encourage an economic growth above 5 percent in 2022, Indonesia targets to achieve Rp1.200 trillion in investment realization. In order to obtain it, both local and foreign investment realization has to be increased up to 22 – 23 percent.
The Ministry of Investment/BKPM is committed to facilitate investors by promoting Indonesia as a climate-friendly investment destination, provide assistant with licensing services through Online Single Submission-Risk Based Assessment (OSS-RBA), assist the financial closing, deliver end-to-end services, and help investors reach the production stage.
“We all have to take precautionary measures. We must prepare ourselves and be careful but also not overly paranoid. The most important aspects in my opinion is that there is only one key to economic (growth) in 2022, which is to control COVID-19,” states President Joko Widodo on his recent speech.
There are challenges ahead. A looming threat of COVID-19’s variant is one. However, with solidarity, vigilance and resilience, Southeast Asia’s largest economy can expect a good year ahead.