Despite the Pandemic, Is the Economy of Indonesia Okay?
Various economic policies have been established by the government to withstand the negative impact of Covid-19 throughout 2020. In 2021, the national economic recovery strategy will continue to recover the wheels of the national economy.
The Covid-19 pandemic has plagued Indonesia for thirteen months since the government confirmed the first corona infection in Indonesia on March 2, 2020. Not only creating a public health crisis, but the Covid-19 pandemic also significantly disrupted national economic activity.
The government’s decision to implement Large-Scale Social Restrictions (PSBB) since April 2020 has had a wide impact on the process of production, distribution, and other operational activities which ultimately disrupt economic performance. The Indonesian economy in 2020 is predicted to grow negatively. Unemployment and poverty rates are increasing. Also, many businesses are battered by the pandemic.
To revive the national economy during a pandemic, the government has issued various regulations with the aim that the wheels of the national economy move back in a positive direction.
The economy of Indonesia during Covid-19
In general, the Covid-19 pandemic has had a negative impact on the national economy throughout 2020 even though starting in the third quarter of 2020 it started to improve.
The second quarter was the culmination of all economic downturns because almost all business sectors were closed to prevent the spread of the SARS-CoV-2 virus that causes Covid-19. The PSBB as a measure to handle the Covid-19 pandemic which was applied to several regions in Indonesia was a factor that caused a contraction in economic growth in the second quarter of 2020.
Entering the third quarter, when the PSBB began to be relaxed, economic activity began to stretch. The economic contraction started to decrease to 3.49 percent. With a record of two consecutive quarters of contraction, the Indonesian economy is technically going into recession. In the fourth quarter, Minister of Finance Sri Mulyani estimated that the economy would still be minus in the range of minus 2.9 percent to minus 0.9 percent. That means Indonesia is expected to close 2020 at a minus economic growth rate.
The Business World Activity Survey (SKDU) noted, the weighted net balance (SBT) of business activities in the third and fourth quarters of 2020 was minus 5.97 and 2.21 percent, an increase compared to conditions in the second quarter which reached minus 35.7 percent. Based on survey data results, improvement in business activities occurred in all economic sectors, especially in the manufacturing sector, trade-in hotels and restaurants, transportation, and communications.
In terms of manufacturing activity, there has been improvement until December 2020. The Manufacturing Index (PMI) in December 2020 reached 51.3 or is at an expansion level. The PMI figure rose from 50.6 in November 2020. The manufacturing index which has returned to 50 points in November and December 2020 is an indicator that manufacturing companies are expanding again due to increased sales resulting in increased production. During the pandemic, the PMI once reached its worst level with a score of only 27.5 in April 2020. Improvements in the manufacturing sector will determine economic recovery.
Public Purchasing Power
The deteriorating economic growth throughout 2020 is inseparable from the purchasing power of the people that was eroded during the pandemic. In fact, household consumption has been the cornerstone of Indonesia’s economic growth.
In 2019, household consumption contributed up to 57 percent to economic growth. Throughout 2020, the pandemic has forced millions of workers to lose their jobs or experience a decline in income.
The PSBB policy to prevent the spread of the Covid-19 pandemic has resulted in limited mobility and community activities that impact reducing domestic demand.
The purchasing power of the people has decreased mainly due to reduced income as well as limited activities. In the midst of all the uncertainty, people, especially the middle and upper class, put a brake on the purchase of goods that are considered not essential.
Declining incomes due to the pandemic have caused most business sectors to reduce their activities or shut down completely. The unemployment rate has also increased. The Central Bureau of Statistics in the August 2020 National Labor Force Survey showed that Covid-19 had an impact on the labor sector. As many as 29.12 million people or 14.28 percent of the 203.97 million working-age population were affected by the pandemic.
The number of unemployed increased by 2.56 million to 9.77 million people. The number of formal workers decreased by 39.53 percent to 50.77 million people from a total of 128.45 million people who worked. In contrast, the number of informal workers jumped 60.47 percent to 77.68 million people.
National Economic Recovery Policy Strategy (PEN) 2020
National economic recovery is carried out by adopting comprehensive fiscal and monetary policies. Besides, the government has also allocated APBN 2020 funds for the economic recovery of IDR 695.23 trillion.
The national economic recovery is expected to begin in the third quarter of 2020. Although it does not grow positively, it is hoped that the national economy will not contract as much as the second quarter. Furthermore, in the fourth quarter of 2020, it is hoped that the national economy will grow positively so that the 2020 contraction can be minimized as little as possible.
To achieve this goal, the government has implemented three policies, namely increasing domestic consumption, increasing business activity, and maintaining economic stability and monetary expansion. This policy is implemented simultaneously with synergy between fiscal policyholders, monetary policyholders, and related institutions.
Regarding people’s purchasing power, the government has allocated a budget of IDR 172.1 trillion to encourage consumption/people’s purchasing power. The funds are channeled through direct cash assistance (BLT), Pre-Work Cards, electricity exemption, and others. The government also encourages the consumption of ministries/agencies as well as local governments by accelerating the realization of the APBN / APBD. Besides, consumption is also directed towards domestic products to provide multiplier effects.
In the business sector, the government is trying to move it by providing incentives/stimuli to MSMEs and corporations. For MSMEs, the government, among others, provides postponement of installments and interest subsidies for bank credit, interest subsidies through People’s Business Credit (KUR) and Ultra Micro (Umi), guarantees for working capital up to IDR 10 billion and provides tax incentives, such as Income Tax (PPh Article 21). ) borne by the government.
To support economic recovery, throughout 2020, the government has allocated a budget of IDR 695.23 trillion for spending on handling Covid-19 and the national economic recovery program (PEN).
The details are the health cluster amounting to Rp. 87.55 trillion, social protection of Rp. 203.90 trillion, sectoral K / L and the local government of Rp. 106.11 trillion, business incentives of Rp. 120.61 trillion, support for MSMEs of Rp. 123.46 trillion. , and corporate financing of Rp. 53.60 trillion.
Bibliography
