Jakarta unveils $1b package to counter coronavirus impact

Non-cash food aid for the poor, investment to attract tourists among initial stimulus measures

Indonesia yesterday announced a raft of measures, including the disbursement of 10.3 trillion rupiah (S$1 billion), to help domestic businesses and consumers counter the economic impact of the coronavirus outbreak.

Finance Minister Sri Mulyani Indrawati said 4.56 trillion rupiah of the sum will be given to about 15.2 million of the poorest households, with each getting 50,000 rupiah more each month in non-cash food aid, bringing the total to 200,000 rupiah. It will be given for six months, starting next month.

This aid for the bottom 20 per cent to 30 per cent of the population "will boost consumer spending and create multiplier effects on the economy", Dr Sri Mulyani told reporters after a Cabinet meeting led by President Joko Widodo.

At the same time, the government will spend another 298.5 billion rupiah on joint promotions with airlines and travel agents to attract foreign tourists to the vast archipelago of more than 17,000 islands.

It will also provide 443.9 billion rupiah to encourage domestic tourism, with locals getting a 30 per cent discount on plane tickets to 10 destinations that have been dubbed the new Balis.

These include Lake Toba in North Sumatra, Tanjung Kelayang Beach in Bangka Belitung Islands and Labuan Bajo in East Nusa Tenggara.

Also, the 10 per cent hotel and restaurant tax at these destinations will be lifted for the next six months, with the central government compensating the local administration for the charge.

Prices of aviation turbine fuel from state-owned oil and gas company Pertamina will also be reduced in the next three months to support flights to these 10 tourist destinations.

Besides these measures, the government will funnel about 1.5 trillion rupiah to stimulate the housing sector. This comprises 800 billion rupiah to reduce mortgage instalments and 700 billion rupiah to subsidise down payments.

Dr Sri Mulyani underlined the significant multiplier effect of this aid to the property sector, citing 170 supporting industrial sectors.

She said the measures are just the initial stimulus to ease the impact of the Covid-19 outbreak and that they "can be extended if necessary".

The virus has killed over 2,700 people and infected over 80,000 people worldwide, mostly in China.

Dr Sri Mulyani stressed that these early responses are in line with the central bank cutting its interest rate. Last week, its benchmark rate was reduced by 25 basis points to 4.75 per cent to give banks more room to support local businesses.

Dr Sri Mulyani, formerly the World Bank's managing director, estimates that Indonesia's growth will shrink by 0.3 percentage point with every 1-percentage-point dip in China's growth.

The government foresees the virus outbreak may slow Indonesia's growth by 0.3 percentage point to 4.75 per cent this year.

As of Monday, Indonesia still had no confirmed cases as tests for the virus on 132 people came up negative, said its Health Ministry.

But local businesses, particularly those in tourism, have been hit hard after Indonesia shut its doors to tourists from China, the second-biggest group of foreign visitors to the country.

Official records show Bali, North Sulawesi and Riau Islands - popular destinations for Chinese tourists - have been the most affected by the travel restriction.

Coordinating Minister for Economic Affairs Airlangga Hartarto said the government will help the jobless by making it easier for them to go for skills training. "We will expedite the launch of the pre-employment card programme, with Bali, North Sulawesi and Riau Islands set to get it first," he said.

A version of this article appeared in the print edition of The Straits Times on February 26, 2020, with the headline 'Jakarta unveils $1b package to counter coronavirus impact'. Print Edition | Subscribe