March 5, 2020 / 10:17 AM / a month ago

Indonesia considering larger fiscal stimulus to fight coronavirus impact

JAKARTA, March 5 (Reuters) - Indonesia is considering expanding a fiscal stimulus to fight the impact of the coronavirus on the same scale as huge spending introduced after the 2008 global financial crisis, its finance minister said on Thursday.

Southeast Asia’s largest economy has been preparing a second stimulus package, which authorities said would include measures aimed at making up for disruption to supply chains caused by the virus outbreak.

The second package would follow the unveiling of a 10.3 trillion rupiah ($727.14 million) stimulus last week to support consumer spending and tourism.

The minister, Sri Mulyani Indrawati, said the economic disruption caused by the epidemic had been “more complex” than the 2008 financial crisis, and required the correct policy response.

“We must assess the virus impact carefully. The impact on firms’ balance sheets may be the same, that their balance sheets worsen, but the nature of the problem could be deeper,” she told reporters, describing how people now feared the risk of death, rather than losing their jobs in 2008.

When asked if the government could expand the current stimulus to match the one it provided during the global crisis, which was about seven times bigger than its first coronavirus stimulus package, the minister said: “We will see. I am very open in this case.”

Indrawati has previously said she was considering tax breaks for some workers as part of the second stimulus package, similar to a measure she launched in 2009.

Meanwhile, Bank Indonesia (BI) Governor Perry Warjiyo on Wednesday said the central bank had scope to use its “many instruments” to prop up economic growth.

He also said the bank had enough foreign exchange reserves, as it vowed to step up intervention to stabilise financial markets.

The Financial Services Authority, which has relaxed rules on credit restructuring for companies hit by the virus outbreak, may relax rules even more, officials said.

The BI last month revised down its outlook for 2020 gross domestic product growth to a range of 5.0%-5.4%, from 5.1%-5.5%, though Indrawati has also warned that Indonesia’s growth could weaken to 4.7%.

Economic growth in 2019 was 5.02%.

Economic growth slowed to 4.6% in 2009 from 6% a year earlier due to the impact of the global financial crisis, but it rebounded to 6.2% in 2010, according to World Bank data. ($1 = 14,165.0000 rupiah) (Reporting by Maikel Jefriando and Tabita Diela Writing by Gayatri Suroyo Editing by Ed Davies)

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