GDP Contraction Held at Around -5.07% Thanks to Fiscal Stimulus

The world is currently facing a major economic challenge due to the Covid-19 pandemic. According to projections by the Institute for Economic and Community Research, University of Indonesia (LPEM UI), the Coronavirus will lower the gross domestic product (GDP) of all countries. Therefore, the government has provided a number of fiscal stimuli to avoid a more severe crisis.

Based on LPEM FEB UI simulations, thanks to fiscal stimulus, the contraction of Indonesia's GDP was contained to around -5.07 percent during the Covid-19 pandemic. This percentage indicates a stronger macroeconomic performance compared to a scenario without government stimulus, which might have resulted in a contraction as deep as -6.31 percent. This shows that the government's stimulus response to the Covid-19 pandemic was quite effective in mitigating economic shocks.

Compared to other countries that also implemented fiscal stimulus, such as the Philippines, Indonesia's economy appears relatively stronger. The Philippine GDP, after receiving stimulus, still contracted by approximately -6.32 percent. However, compared to other Southeast Asian countries like Malaysia, Vietnam, Thailand, and Singapore, the benefits of fiscal stimulus on Indonesia's economy appear suboptimal.