The rebound is predicated on the pandemic being contained and the global economy continuing to strengthen, according to the report.
The report highlights that although consumption and investment growth were subdued during the first quarter of 2021, consumer sentiment and retail sales started to improve during the second quarter suggesting stronger growth momentum.
However, it also notes that pandemic related uncertainty remains elevated due to risks of higher viral transmission.
"Accelerating the vaccine rollout, ensuring adequate testing and other public health measures, and maintaining strong monetary and fiscal support in the near term are essential to boosting Indonesia’s recovery," said Satu Kahkonen, World Bank Country Director for Indonesia and Timor-Leste in a press release on Thursday.
"Parallel reforms to strengthen the investment climate, deepen financial markets, and improve fiscal space for longer-term sustainability and growth will be important to further build consumer and investor confidence," Kahkonen stated.
The report recommends the government to develop a well sequenced medium-term fiscal strategy, including clear plans to improve tax revenues and fiscal space for priority spending.
It also highlights the importance of maintaining accommodative monetary policy and stimulating private credit to support the real sector while monitoring external and financial vulnerabilities.
The report highlights the critical role of adequate social assistance in mitigating rising poverty risks.
It finds that maintaining the 2020 social assistance package in 2021 could potentially keep 4.7 million Indonesians out of poverty.