Sabtu 03 Apr 2021 11:09 WIB

Three Game-Changers Against Indonesia's Economic Contraction

Cooperation program will help accelerate Indonesia's vaccination program and economic

Foto: Republika/Prayogi

Social protection programs are provided to the poorest 40 percent of the population and vulnerable groups. (Capture: Ilustrations Rupiah and Dollar AS)

REPUBLIKA.CO.ID, By Elba Damhuri, Head of Republika.co.id

The world faces tough challenges when the Covid-19 pandemic hits various parts of human life, including the economy. Indonesia without exception has been severely affected by the economic impact of this corona pandemic.

The micro, small and medium enterprises (MSMEs/UMKM) sector was hit by the pandemic wave quite badly. There are around 30 million MSMEs that have been directly and indirectly affected by the Covid-19 pandemic.

The Indonesian Minister of Manpower Ida Fauziyah noted that 17.8 percent of companies made layoffs (PHK-pemutusan hubungan kerja) during the Covid-19 pandemic. As many as 25.6 percent of companies lay off workers, and 10 percent of companies do both.

The survey by the Ministry of Manpower in 2020 showed that around 88 percent of companies were affected by the pandemic which resulted in losses to company operations. The company's performance also has a direct impact on the performance of the banking industry, which must restructure loans.

It is not surprising that Indonesia's economic growth in 2020 will be minus 2.07 percent. The same trend is expected to continue in the first quarter of 2021.

Indonesian Finance Minister (Menkeu) Sri Mulyani stated that economic growth in the first quarter of 2021 is likely to be minus one percent to minus 0.1 percent. Indeed, this projection is better than the growth throughout 2020 which is minus 2.07 percent.

The growth projection is based on economic activity in Indonesia which is starting to show a recovery. For 2021, the projected economic growth is in the range of 4.3 percent to 5.3 percent. This figure is down when compared to the economic growth assumptions in the 2021 State Budget, namely the range of 4.5 percent to 5.5 percent.

President Jokowi hopes that the 5 percent figure can be achieved, while global institutions such as the OECD estimate 4.9 percent. The International Monetary Fund (IMF) and the World Bank estimate Indonesia's economic growth at 4.8 percent and 4.4 percent in 2021, respectively.

What should the government do to be able to return the economy to the green alias plus zone?