Dr.

Muhammad Rizky Prima Sakti

Assistant Professor (Islamic Finance)
Department of Business Administration
University College of Bahrain

Webinar – MES Malaysia

12th December 2020
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Global economy projection in 2020-2021

• The world economy will be

accelerated in 2021, from -4.4% in
2020 to 5.2% in 2021

• The availability of covid-19 vaccine in

2nd semester 2021 → the key driver
for IMF to forecast this improvement

• The emerging economies will

improve more than global economy,
reaching 6% in 2021

Source: IMF (Oct, 2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

V-shaped economy recovery

In 2021, V-shaped economy recovery

would be anticipated → strong policy
responses from both central banks
and government.

The massive economic stimulus has

expedited consumer confidence

Although the recovery is subjected to

the play out of covid-19 pandemic.
Baseline scenario: covid-19 gradually
dissipate

BUT, if the number of new cases

Source: Radjou (2020)
remain increases, it would correct
some percentage points of projection
V-shaped recovery: Back to doing better
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Fiscal Policy
Fiscal deficit in various jurisdictions

Big fiscal stimulus package: as a

cushion the multifold impacts of
pandemic

In developed economies → fiscal

deficit > 8% of GDP

In emerging economies → fiscal

deficit : relatively less than developed
economies
Emerging economies Developed economies

Source: OECD, MoF (2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Monetary Policy
Quantitative easing in developed economies Quantitative easing in emerging economies

Source: Bank of Indonesia (2020)

Quantitative easing QE (injeksi likuiditas) : a form of unconventional monetary policy in
which CB purchases LT securities from open market operations

In emerging economies, QE is conducted through combination of lowering interest rate and

liquidity injection to banking and financial market.
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Trump vs Biden Economic Policy

Trump economic policy Biden economic policy

Source: Mark Zandi, Moody’s Analytic in SSI Report (2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Three major issues in global economy 2021

US-China
dispute

De-
globali
zation Post-
pandemic
world
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2020 Indonesian economic review

Purchasing
covid-19
power of
cases:
middle-
>6,033 (as of
income class
Prior to 10-12-20)
Relaxing still weak
covid-19,
lockdown
retail sales
(PSBB) in
have been
mid-June Struggling to
declining The worst catch up
hit country income to
in SEA the pre-covid
Covid-19 → level Govt needs
recession in to support
3rd quarter SME, middle
2020 income
Capital
outflow in
March – Apr
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2021 Indonesia’s economy outlook

MSME business landscape in Indonesia

A total of 25 million micro-small medium

enterprises in Indonesia

Contribution of MSME to GDP reached

60.3% in 2018 (Ministry of Cooperative and
SME)

Out of 25m MSME, >80% rely on domestic

consumers, while only 0.7% rely on
international buyers.

Source: Indonesia Statistic Bureau (2018)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2021 Indonesia’s economy outlook

MSME business by sector

A big portion of MSME

are selling primary
goods, i.e. 40.8% of
total MSME

Nevertheless, most of
MSME are non-
essential goods (or less
essential goods)

Source: Indonesia Statistic Bureau (2018)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

Start recession in Q3 2020

Indonesia’s GDP growth

Indonesia economy had contracted

3.49% YOY in 1Q20, and 5.32% in
2Q20.

Officially, Indonesia’s turned into

recession

Expecting another contraction in

4Q20, as the covid-19 is still
unfolding. High number of new daily
cases.

Source: Bloomberg, Mirae Asset (2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2020-2021 macroeconomic projection

Source: Bank Indonesia, MoF, Mirae Asset (2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2021 Indonesia’s economy outlook

Indonesia’s economic recovery in 2021 would be a

“U-shaped” instead of V-shaped

The covid-19 cases in Indonesia is more severe as

compared to other countries in SEA

Poor healthcare infrastructure coping with covid-

19, and majority of business in Indonesia are
predominantly micro-small enterprises
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

2021 Indonesia’s economy outlook

Share of stimulus to total PEN in 2020 and 2021

Continue
spending in
prioritized
sectors
Boost
Household
consumpt.
Focus on
low-middle
income class
Digging up
potential
revenue

Source: MoF (2020)

 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

The Role of Islamic Banks to cushion the covid-19 impacts

• Massive collection of zakat, infaq, waqf

Bank Syariah Mandiri • To support people and society who severely impacted
• Support healthcare and medical equipment's

• Restructuration scheme
BNI Syariah • Payment deferral due to covid-19
• Based on customers needs and conditions.

• Wardah Halal cosmetic contributed IDR40bn to

Halal Industry
cushion the multifold impacts of covid-19
 Islamic banking & The Way
Global Economy Indonesia’s Economy
finance Forward

The Role of Islamic Social Finance

World Giving Index 2019 → Indonesia is one of

the generous country related socio-religious
activities

Indonesia is the most populous Muslim country

in the world (87% Muslims)

Potential of zakat collection in 2019 = IDR233.84

tn (or $14.9bn), but the realization of zakat is
only IDR 4tn

Zakat collection growth 36% from 2002-2019

Thank You

Dr Muhammad Rizky Prima Sakti

Assistant Professor
University College Bahrain
Phone : (+973) 1779-0828 ext. 347
Email : mrizky@ucb.edu.bh
Website : www.ucb.edu.bh