Indonesia in the Time of Covid-19

Abstract

The Covid-19 virus has spread across the world with alarming speed, infecting millions and causing economic disruption on an unprecedented scale. In this survey, we examine the impact of the outbreak on the Indonesian economy, as well as the government’s response to the public health crisis and its provisions for the emerging economic crisis. Indonesia’s delay in responding to the health crisis while Covid-19 spread in neighbouring countries in January–February 2020 has been costly for the health of the population. The government’s policy responses have so far been aimed at steadying the ship, addressing both the needs of the poor and the potentially poor (vulnerable) groups. At the time of writing, Covid-19 had not been tamed in Indonesia by any means. Hence, its implications for economic growth, jobs and welfare remained uncertain, as policy discussions were all about opening up the economy from virus-imposed restrictions across the country, under what has been termed the ‘new normal’.

Virus Covid-19 telah menyebar ke seluruh dunia dalam kecepatan yang menakutkan, menginfeksi jutaan orang, dan menyebabkan gangguan ekonomi pada skala yang tidak diperkirakan sebelumnya. Dalam survei ini, penulis menelaah dampak dari persebaran virus pada perekonomian Indonesia, juga respon pemerintah terhadap krisis kesehatan publik, serta upaya-upaya yang dilakukan dalam mengatasi krisis ekonomi yang timbul. Keterlambatan respon Indonesia terhadap krisis kesehatan selagi Covid-19 menyebar di negara-negara tetangga pada Januari – Februari 2020 telah berdampak mahal bagi kesehatan penduduk. Respon kebijakan pemerintah selama ini ditujukan pada upaya menyeimbangkan kapal dengan menyasar kebutuhan orang miskin dan mereka yang berpotensi miskin (golongan masyarakat rentan miskin). Pada saat penulisan, Covid-19 belum dapat ditaklukkan di Indonesia oleh upaya apapun. Oleh karenanya, dampaknya bagi pertumbuhan ekonomi, kesehatan, dan kesejahteraan masih belum pasti seiring bergulirnya diskusi kebijakan mengenai pembukaan kembali perekonomian dari restriksi akibat virus, dalam terminologi yang disebut sebagai ‘kondisi normal baru’.

Keywords:

• Indonesia
• Covid-19
• social protection
• macroeconomics
• fiscal responses

JEL classifications:

• O53
• I15
• I18
• I38
• E60
• H30

ACKNOWLEDGMENTS

The authors wish to thank a number of people for their valuable comments on earlier drafts, including Hal Hill and Budy Resosudarmo. Special thanks are due to Chris Manning, who has provided guidance and advice in the preparation of this Survey.

Notes

1 Two scenarios are considered for WTO forecasts: an optimistic scenario (a V-shaped recovery) and a pessimistic one (an L-shaped recovery). Under both scenarios, all countries experience double-digit declines in exports and imports in 2020.

2 On 10 April 2020, large-scale social restrictions were imposed in the city of Jakarta through gubernatorial Regulation 33/2020 and Decree 380/2020 in order to curtail the spread of the coronavirus. The regulation and decree were imposed around five weeks after the first Covid-19 case was confirmed in Indonesia (in Depok, a city situated within the greater Jakarta metropolitan area).

3 See https://www.ghsindex.org/.

4 East Java did not implement any PSBB restrictions. This may have contributed to the spike in cases there in May.

5 An example was the revitalisation of an athlete’s dormitory in Kemayoran (Wisma Atlet) as a makeshift hospital for Covid-19 patients and a self-isolation centre.

6 Unless otherwise specified, all figures refer to real, annual changes registered in the current quarter, compared with 12 months earlier.

7 See https://www.bps.go.id/linkTableDinamis/view/id/980.

8 The IMF (2020a) notes that the global economic downturn is so widespread that 100 countries have already asked for emergency funding. Yet Indonesian government officials have argued, perhaps optimistically, that Indonesia has the resources to deal with the fallout from Covid-19, so there is no urgency to seek help from the IMF.

9 https://www.bi.go.id/id/publikasi/survei/Prompt-Manufacturing-Index/Pages/pmi-tri-wulan-I-2020.aspx.

10 This regulation may give rise to moral hazard, as there is a risk that the government will not reintroduce the 3% rule. This deficit rule has played an important role in Indonesia’s record of economic stability before and after the AFC (Hill 2012).

11 Data from the National Labour Force Survey (Sakernas) in August 2019 show that more than half of all workers in the agricultural sector are aged 45 or above; in all other industries, older workers (45 or above) make up only one-third of the workforce.