While Indonesia is still in the middle of the COVID-19 crisis, albeit – most likely – set to exit the economic recession in the second quarter of 2021 due to the so-called low base effect, and while Indonesian consumers continue to display reluctance to spend (reflected by 16 consecutive months of contracting retail trade on an annual basis), the Indonesian government expressed its intention to raise Indonesia’s Value-Added Tax (VAT, or in Indonesian: Pajak Pertambahan Nilai, abbreviated as PPN).

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It was already known that –just like in 2020– the Indonesian government would ban the traditional mudik this year (mudik, which is a distinctive feature of Indonesian culture, refers to the exodus of millions of city-dwellers toward their places of origin where they typically spend a few days to celebrate the end of the Ramadan month).

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The textile and textile products industry (which includes garments or clothes) is a very important one for the Indonesian economy because this industry ranks among the country’s biggest foreign exchange earners (thanks to strong exports), while also providing jobs to more than 3.7 million Indonesians, and contributing nearly seven percent to the country’s gross domestic product (GDP) – provided we only take non-oil and gas manufacturing into account – or around 1.25 percent of total GDP.

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On 5 May 2021, Indonesia’s Statistical Agency (Badan Pusat Statistik, BPS), released the latest gross domestic product (GDP) data of Indonesia, covering the first quarter of 2021. As expected, the economic recession persisted into Q1-2021 for Southeast Asia’s largest economy.

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