Indonesia to support economy with $8 bln stimulus to counter virus impact

DAMPAK VIRUS CORONA - JAKARTA. Indonesia announced a 120 trillion rupiah ($8.1 billion) stimulus package on Friday to support Southeast Asia's biggest economy as the spread of the coronavirus disrupts global activity.

The stimulus, representing 0.8% of gross domestic product (GDP), includes exempting some workers in manufacturing from income tax and giving manufacturing companies a discount on corporate tax payments, Finance Minister Sri Mulyani Indrawati told a news conference.

Indrawati has previously warned that Indonesia's economic growth could slow to 4.7% this year if the virus outbreak slows Chinese and global growth. Indonesia's economy grew 5.02% last year.

A number of other governments and central banks in Asia have also announced additional support measures this week to shore up confidence as the virus spreads and global financial markets tumble.

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Bank Indonesia's (BI) 2020 growth outlook was slightly higher at 5.1%, though Governor Perry Warjiyo this week said this was likely be revised down at its March 18-19 policy meeting, to take into account the spread of the virus globally. BI cut interest rates last month in response to the outbreak.

"This won't be the last announcement we make because the situation is very dynamic," Indrawati said as she unveiled details of the new tax measures.

"We will prepare all instruments to mitigate and minimise the impact on companies and people," she said.

The stimulus package was expected to widen the budget deficit this year to 2.5% of GDP, from an initial plan to keep it around 1.8%, Indrawati said.

The tax relief for manufacturing workers will be given to those who make 200 million rupiah or less a year.