World, Asia - Pacific

'Auto sector stimulus not enough for Indonesia economy'

Plan unlikely to spur sustainable growth, gov't needs to focus on job creation, cash-intensive programs, says economist

Adelline Tri Putri Marcelline   | 27.04.2021
'Auto sector stimulus not enough for Indonesia economy'

JAKARTA, Indonesia

The Indonesian government’s stimulus for the automotive sector is not sufficient to revive the economy, an expert said on Tuesday.

“It is necessary to add cash-intensive programs,” Mohammad Faisal, an economist at the Center of Reform on Economics, said during a virtual discussion.

Since the start of April, Indonesia has cut luxury sales tax on sales of some new cars to boost its automotive industry.

Faisal said the move could increase car sales but the growth was unlikely to be sustainable.

“That means car sales will decline when the tax discount finishes at the end of this year and things will return to how they were before this stimulus,” he said.

Along with the domestic market, the government needs to focus on automotive exports, he said, pointing out that Indonesia is lagging far behind in the field compared to neighboring Thailand.

The government’s stimulus program, according to Faisal, could be sustainable if there was also job creation and more cash-intensive programs.

“Job creation and cash-intensive programs will boost purchasing power and increase productivity,” the economist explained.

Earlier this month, Finance Minister Sri Mulyani said the automotive stimulus policy was expected to push public consumption, especially for top products of the domestic industry.

Indonesia’s central bank has revised down its forecast for economic growth in 2021, bringing it to the range of 4.1% to 5.1% from the previous 4.8% to 5.8%.

The International Monetary Fund has also slashed its projection to 4.3% from the previous 4.8%.

* Writing by Rhany Chairunissa Rufinaldo with Anadolu Agency’s Indonesian language services in Jakarta

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