Indonesia warns unemployment could hit decade-high due to coronavirus pandemic

A rising number of coronavirus cases recorded in some of Indonesia's biggest provinces could increase pressure on GDP. PHOTO: EPA-EFE

JAKARTA (REUTERS) - Indonesia's unemployment rate could hit the highest in more than a decade this year due to the coronavirus pandemic, with South-east Asia's largest economy set to contract more than previously expected in the second quarter, ministers said.

Planning Minister Suharso Monoarfa told a parliamentary hearing on Monday (June 22) that four million to 5.5 million people could lose their jobs this year, pushing the unemployment rate up to 8.1-9.2 per cent, versus 5.28 per cent in 2019.

The unemployment rate may remain between 7.7 per cent and 9.1 per cent in 2021, he said.

The forecast is still more conservative than that of Indonesia's chamber of commerce and industry (Kadin), whose chairman expects new rounds of layoffs by August on top of an estimated 6.4 million jobs shed so far.

The number of people living below the poverty line is expected to rise to between 26.2 million to 27.5 million, Mr Monoarfa said, representing a poverty rate of 9.7-10.2 per cent in a country with more than 260 million people.

"This pandemic between March 30 and June 6... has resulted in massive losses in working hours. This has shed around 362 trillion rupiah (S$35.5 billion) in purchasing power," he said.

His ministry's estimates were made assuming 2020 gross domestic product comes in within a range of a 0.4 per cent contraction to a 1 per cent expansion.

Finance Minister Sri Mulyani Indrawati told the same hearing second-quarter GDP was expected to contract 3.8 per cent, compared with her previous estimate for a 3.1 per cent drop.

She also warned a rising number of coronavirus cases recorded in some of Indonesia's biggest provinces, such as East Java, could increase pressure on GDP.

Mr Monoarfa predicted foreign exchange earnings from tourism this year would slump to US$3.3 billion to US$4.9 billion (S$4.6 billion to S$6.8 billion), from US$19.7 billion in 2019.

The government has allocated nearly US$50 billion in spending on healthcare, social protection and economic stimulus programmes to try to manage the pandemic's impact.

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