Indonesia to boost spending, incentives as virus fears hit tourism

INDONESIA - BOGOR. Indonesia will increase public spending and provide incentives to the tourism industry to support domestic consumption and shield the economy from the impact of the coronavirus outbreak in China, the finance minister said on Tuesday.

The coronavirus epidemic in China may knock 0.1 to 0.3 percentage point off Indonesia's GDP growth assuming a 1 to 2 percentage points reduction in China's economic expansion, according to Indonesian government estimates.

The virus has killed more than 1,000 people, while 42,000 others were infected mostly in China, but also in more than two dozen countries. Indonesia, the world's fourth-most populous country, has not confirmed any cases.

"We understand that some sectors are already affected, including tourism, and we saw a drop in industrial (activities) and commodity prices," Minister Sri Mulyani Indrawati told reporters.

"That's why all government institutions were asked to accelerate spending, including spending that would support tourism," she said, after attending a cabinet meeting led by President Joko Widodo.

Jakarta disbursed 30.9 trillion rupiah ($2.26 billion) in central government spending in January, mostly for social programmes and salaries for civil servants, the minister said.

Fiscal transfers to Indonesia's nearly 1,500 villages had been accelerated, with a total of 586 billion rupiah already wired as of Feb. 10, more than 80% larger than the amount transferred in the same period last year, she said.

Indrawati also said the government was considering incentives to support tourism, such as subsidies for airlines to cut airfares, among the options being considered.

Indonesia's GDP growth in 2019 slowed to 5.02%, the weakest in three years, as falling export earnings and soft investment hit household consumption amid a worldwide economic slowdown. The government's growth target this year is 5.3%

Economists say the growth data and the impact of the virus outbreak on the economy may pressure the central bank to start cutting interest rates again, following four rate cuts in 2019.