February 25, 2020 / 10:40 AM / a month ago

UPDATE 1-Indonesia announces nearly $750 mln stimulus in response to coronavirus

* Basic needs subsidies, incentives for tourism part of package

* Outbreak in China could weaken 2020 GDP growth to 4.7% -finmin (Adds details, comment by business association)

By Maikel Jefriando and Gayatri Suroyo

JAKARTA, Feb 25 (Reuters) - Indonesia has prepared a stimulus package worth 10.3 trillion rupiah ($742.6 million) to protect its economy from the impact of the coronavirus outbreak in China, ministers said on Tuesday.

The announcement came less than a week after Indonesia’s central bank cut interest rates for a fifth time since May, while trimming its 2020 growth outlook over the virus epidemic.

Growth in Indonesia’s economy had already slowed to 5.02% in 2019, its lowest in three years, amid a global slowdown.

Finance Minister Sri Mulyani Indrawati warned the virus outbreak in China, Indonesia’s top trade partner and a major source of investment and tourism, could further weaken growth to 4.7% in 2020, below the government’s target of 5.3%.

The stimulus package that Indrawati laid out includes a 30% increase in subsidies for basic needs for 15.2 million poor households for six months to support consumption. That measure that would cost the government 4.6 trillion rupiah.

A state property financing programme would be expanded by 1.5 trillion rupiah and expected to cover financing for 175,000 homes.

Airlines and travel agents will be given 443.4 billion rupiah to provide 30% discounts on air fares for some seats for three months. Another 298.5 billion rupiah will be used as an incentive to bring in foreign tourists to visit one of Indonesia’s 10 most popular destinations.

Restaurants and hotels will be exempted from some taxes paid to regional governments for six months, with the central government providing 3.3 trillion rupiah cover for the shortfall in regional budgets.

The government will also convert 147 billion rupiah of fiscal transfers that had not been earmarked to programmes to support tourism.

In addition, state energy company Pertamina and two state airport operators would be ordered to cut jet-fuel prices and airport charges for three months.

“We’re going to focus on markets other than China, such as Australian and European tourists, for example, who spend a lot per arrival,” said Tourism Minister Wishnutama Kusubandio, setting a target to get 736,000 tourists.

The coronavirus has killed more than 2,600 people in mainland China and infected more than 80,000 others. There have been more than 2,000 cases in 28 countries outside China, with more than 20 deaths. Indonesia has not had any confirmed infection cases.

Hariyadi Sukamdani, chairman of Indonesia’s Employers Association, said the virus outbreak has cut imports of major materials for many Indonesian factories and some foodstuffs, such as garlic, which could trigger increases in prices.

At least 50,000 hotel bookings have also been cancelled, mostly by Chinese tourists, he said.

“We depend quite a lot on China,” Sukamdani said.

$1 = 13,870 rupiah Reporting by Maikel Jefriando and Gayatri Suroyo, editing by Larry King

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