JCI Slumps to Lowest Since 2017

KOMPAS/TOTOK WIJAYANTO

A woman shops on Sunday (9/2/2020) at a supermarket in Bintaro, South Tangerang, Banten. Consumer spending grew 5.04 percent in 2019, a year-on-year decrease of 0.01 percent. The government needs to take extra precaution in issuing policies that do not affect consumer purchasing power.

JAKARTA, KOMPAS — The impact of the Covid-19 outbreak on the global economic slowdown has begun to materialize in the Jakarta Composite Index (JCI). By the close on Thursday (27/2/2020), the JCI had dropped to 5,535.69, the lowest level since 16 March 2017.

The JCI dropped 2.69 percent on Thursday, following its 1.7 percent decline on Wednesday. The index has fallen 12.13 percent since the beginning of the year – the steepest decline among Southeast Asian stocks.

Over the two days from Wednesday to Thursday, foreign investors recorded net selling volume of Rp 2.75 trillion. As a result, foreign investors have booked Rp 4.71 trillion in net selling volume since the start of 2020.

Meanwhile, the rupiah exchange rate on the Jakarta Interbank Spot Dollar Rate (Jisdor) weakened on Thursday to Rp 14,018 per US dollar to again pass the Rp 14,000 per US dollar level since 19 Dec. 2019.

The spread of the new type of coronavirus has made investors leave the market to a safe haven in droves.

The downturn in the JCI was unexpected among market players, because the Indonesian capital market saw a high inflow of foreign funds at the beginning of the year was high due to positive sentiment at home. "The spread of the new type of coronavirus has made investors leave the market to a safe haven in droves. This is happening globally," Praus Capital research head Alfred Nainggolan said on Wednesday.

Alfred continued that external conditions were exacerbated by the limited positive sentiment at home. He hoped that the government would calm the market through economic incentives.

Meanwhile, a number of countries, including Indonesia, have widened the budget deficit in anticipation of a potential economic slowdown due to the Covid-19 outbreak.

KOMPAS/LASTI KURNIA

An officer drives his motorcycle amid by busy loading and unloading activities at Operation Terminal 3, Tanjung Priok Port, Jakarta, Thursday (20/2/2020). Statistics Indonesia (BPS) noted the value of non-oil exports and imports to and from China had decreased in January 2020 but said the decline was not entirely due to the coronavirus.

Widened deficit

In its latest report, Fitch Ratings said that the deficit in the 2020 State Budget could potentially widen from the targeted 1.74 percent of gross domestic product (GDP) to 2.5 percent of GDP. The widening deficit was influenced by three main factors: slowing economic growth, the Covid-19 outbreak and sluggish incomes due to non-optimal tax base expansion.

PT Bank Permata economist Josua Pardede suggested that the government maintain the budget deficit below 2.5 percent of GDP. "Counter-cyclical fiscal policy is still needed to maintain external balance," Josua said Thursday.

The widening deficit will be followed by an increase in debt and loans, so it must be managed carefully. The government must ensure that debt and loans for productive spending will have the power to jack up the economy.

Citing a Morgan Stanley report, almost all countries in Asia were seeing a widening budget deficit, with South Korea seeing a widening of 0.2 percent from its initial target, Taiwan 0.6 percent, Thailand 0.5 percent, Malaysia 0.7 percent and Singapore 2.1 percent.

Several measures could be encouraged to offset the impacts of Covid-19.

Acting head Arif Baharudin of the Finance Ministry’s Fiscal Policy Office said that there was a possibility that the 2020 State Budget would widen beyond the targeted 1.76 percent of GDP.

Several measures could be encouraged to offset the impacts of Covid-19.

President Joko Widodo said on Thursday at the Indonesia Digital Economy Summit that the digital economy could improve public welfare. Indonesia’s digital economy is estimated to reach US$133 billion, Rp 1.88 quadrillion (2025).

Vice President Ma\'ruf Amin said on Wednesday night at the opening of the 7th Indonesian Muslim Community Congress in Pangkal Pinang, Bangka Belitung Islands, that the government was strengthening the halal industry and sharia economy to improve public welfare.