Soemitronomimics Key To The Republic Of Indonesia Through Various Global Economic Crisiss

JAKARTA - Uncertainties, especially those sourced from external factors, almost color the national economy every year. While the Government is able to maintain and manage domestic demand, the optimism of the economy will grow very openly.

Chairman of the Board of Commissioners of the Deposit Insurance Corporation (LPS) Purbaya Yudhi Sadive at the LPS Financial Literacy event in Medan, Wednesday, August 20, said Indonesia was proven capable of going through various global economic crises, when using the "local wisdom" or local wisdom moves.

"The local wisdom was even introduced long before Indonesia's independence by Professor Soemitro Djojohadikusumo in 1943," said Purbaya.

Soemitro said that Purbaya in its dissertation introduced development trilogy which emphasized the three pillars, namely high economic growth, equitable distribution of development benefits and dynamic national stability.

In the context of this trilogy, Prof Soemitro emphasized the importance of banking stability. He took lessons from The Great Depression in the US, and its impact on the Indonesian economy. Soemitronomimics' local wisdom strategy, said Purbaya, has proven to be effective in reducing the impact of the global economic crisis.

Purbaya gave an example of the 2008 global economic crisis due to subprime mortgage in the US and during the 2020-2021 COVID-19 pandemic, the Indonesian economy quickly recovered due to a domestic demand.

"The economic policy response in 2008 was appropriate because economic activity was still running, supported by the availability of liquidity through growing circulating money," said Purbaya.

The same situation also applies during the pandemic. Even though it was almost collapsed at that time, the government quickly changed and responded with a limited easing, so that Indonesia managed to get out of recession and return to positive growth as in 2009 with a growth of 4.9 percent.

"In 2020 we also use similar knowledge, because it is already smart, namely maintaining domestic demand," said Purbaya.

This condition was different during the 1997-1998 monetary crisis. At that time, said Purbaya, the policy response was confusing because interest rates rose by 60 percent, while the money in circulation grew by more than 100 percent.

As a result, there are no business actors who dare to borrow from the bank. On the other hand, the abundant money in circulation is used to attack the rupiah again.

"The puzzling policy gives fuel to attack our rupiah," said Purbaya.

Of the three crises, it is clear that Purbaya, two of them, namely the 2008 global crisis and the COVID-19 pandemic, can be passed well because it uses a local wisdom approach, while the 1998 crisis leaves a deep gap because it uses recipes from outside.

"So we already have a large capital, stay well managed. Focus on yourself by utilizing domestic demand," said Purbaya.

If the Government targets the economy in 2026 to grow 5.4 percent, Purbaya considers it very realistic. Moreover, if optimized with the support of economic growth from the regions.

"The economy of the market, rice fields and Micro, Small and Medium Enterprises (MSMEs) is the pillars of the national economy," said Purbaya.

North Sumatra's economy added that Purbaya is relatively stronger in supporting the national economy. Moreover, it relies on the plantation and tourism sectors which are in the labor-intensive sector, so that it is able to absorb a lot of workforce.