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Could Indonesian Economy Grow 5% Next Year?

After being battered in 2020, the Indonesian economy is believed to soar in 2021. The government it self is targeting economic growth in 2021 to reach 5%.

Deputy Minister of Finance Suahasil Nazara explained why the government is so confident in these projections. One of the reasons is because of the contraction in the economy this year.

“The improvement from seeing yesterday we hope that the conditions in the second quarter of 2020 are sufficiently negative. We hope that gradually there will be an improvement in consumption, improvement in investment and with the support of consumption and government activities, we hope that it will contribute to growth. economy 5%, “he said in a virtual press conference, Wednesday (30/9/2020).

Suahasil continued, technically if economic growth is negative this year, next year there will be an increase or he calls it a technical rebound.

“If the growth is negative, it means that technically, the next year there will indeed be a slight increase because this year the base is lower, this is called a technical rebound. So if one year it goes down, the next year it can appear to go up, resulting in positive growth. Technical rebound This will also occur, “he explained.

Economic growth in 2021, according to him, there will be a combination of technical rebound with gradual improvement in economic conditions. Because he is sure that consumption and investment which become the motor of the economy will improve.

Meanwhile, the Head of the National Economic Recovery Task Force (PEN) as well as Deputy Minister of BUMN Budi Gunadi Sadikin added that he was sure that a series of incentives prepared in the PEN program would have an impact on the economy.

Calculations Theory Of Indonesian Economy Growth

“First, in theory, there are calculations. But he said that every rupiah that the government distributes will have an impact. This amount is multiplied by the fiscal multiplier, roughly like that. Where the fiscal multiplier is a formula which equals one divided by one minus the marginal propensity to consume. That’s back again friends in macroeconomics who are experts, “he explained.

“I heard that our marginal propensity to consume is 0.52%, so that the fiscal multiplier is 2.1. So if we distribute it during the third quarter, it could be Rp. 137.89 trillion, that’s about the impact on GDP of 2.1. Or around Rp. 270 trillion. But again, this is a rough calculation and in return I am not an economist. I studied economics while working in banking. The government has its own cancer. But for us, if we can give Rp. 100 trillion, it’s about twice the impact, “added Budi.

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