Indonesia’s economic performance has garnered impressive accolades from esteemed institutions like the International Monetary Fund (IMF) and the World Bank. This commendation comes directly from Suahasil Nazara, Deputy Minister of Finance, affirming Indonesia’s adept handling of economic policies during the turbulent period of the Covid-19 pandemic, resulting in a swifter recovery compared to many other nations.
In his address during a Working Meeting of the DPD RI Committee IV at the Parliament Complex in Jakarta on Tuesday (5/9/2023), Suahasil shared insights into the formidable challenges faced by the government in safeguarding the country’s economy amid the pandemic. He emphasized that the pandemic, while formidable, wasn’t the sole peril confronting the nation. The prevailing global uncertainty served as an additional menace that the government had to navigate to fortify Indonesia’s economic resilience.
Suahasil expounded on the ongoing global uncertainty, even as the pandemic’s grip was beginning to wane. The world economy, initially beleaguered, abruptly rebounded as the Covid-19 tempest subsided. While this rapid economic resurgence held promise, Suahasil cautioned that it also carried inherent risks.
In response, developed countries opted to raise their interest rates to temper their overheating economies, further complicating the global economic landscape.
Suahasil elaborated on the deteriorating situation, exacerbated by the eruption of the Russia-Ukraine conflict in early 2022. “We were also caught off guard by the Russia-Ukraine conflict, which precipitated surging inflation rates and heightened monetary tightening,” he stated.
Faced with these multifaceted challenges, the Indonesian government had to innovate strategies to shield the nation from the heightened economic fluctuations on the global stage. Consequently, Suahasil revealed that the government opted for a counter-cyclical policy, a deliberate measure to weather these economic shocks.
In practice, Suahasil elucidated that this counter-cyclical policy was executed through budgetary decisions incorporated into the State Revenue and Expenditure Budget (APBN). These decisions often ran contrary to prevailing economic conditions.
He provided an example of this policy’s application during the early stages of the pandemic in 2020. At a time when the economy was reeling from the pandemic’s impact, the APBN was meticulously crafted to accommodate a substantial deficit, reaching up to 6.1% of the GDP.
This expanded deficit limit was duly authorized through the enactment of Law Number 2 of 2020, which specifically pertained to the State Financial Policy and Financial System Stability, explicitly addressing the handling of the Coronavirus Disease 2019 (COVID-19) pandemic.
Suahasil expounded on the significance of this approach, emphasizing that it was imperative to boost spending when the economy was enduring severe contractions.
However, as the pandemic situation gradually improved, and economic revival became apparent, the government shifted its stance, transitioning to a fiscal approach more in line with standard fiscal principles. Suahasil underscored that the substantial deficit policies implemented during the pandemic could not be perpetuated indefinitely. Thus, commencing from 2022, the government initiated measures to curtail the deficit within the APBN.
Suahasil asserted that this comprehensive series of policies bore fruit, effectively alleviating the economic distress afflicting Indonesia. Substantiating this claim, he pointed out that in 2022, the government had successfully reduced the deficit within the APBN to 2.4% of the Gross Domestic Product (GDP).
“This achievement surpasses the stipulated mandate in the legislation, which mandates that our deficit must be reduced no later than 2023,” Suahasil emphasized.
The fruits of Indonesia’s economic resilience and adept policymaking have not gone unnoticed on the global stage. Suahasil elucidated that during the ongoing ASEAN High-Level Conference in Jakarta, Indonesia’s economic prowess is poised to be a focal point of evaluation, offering a glimmer of hope in a world grappling with a multitude of pressures.
In sum, Suahasil underscored that the IMF and the World Bank had extended their commendation to Indonesia, acknowledging the nation’s adept management of economic policies and the impressive trajectory of its economic recovery.