Reasons For Indonesia Not Doing A Lockdown And Fears Of An Economic Recession

JAKARTA - The government claims that Indonesia's economic performance is better when compared to other countries that have implemented lockdown policies or total territorial isolation. This is because several countries that decided to lockdown have fallen into the brink of economic recession. Among them, Singapore and India.

Regarding the handling of the COVID-19 pandemic, the Indonesian government has decided to implement Large-Scale Social Restrictions (PSBB), rather than a total lockdown.

Did the government choose to implement the PSBB, for fear of an economic recession?

Executive Director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad assessed that the Indonesian government is already worried about an economic recession. Because, from the start, the government's focus on the pandemic was aimed at the economic sector.

Early March, President Joko Widodo (Jokowi) announced for the first time that there were positive cases of COVID-19 in Indonesia. The government immediately responded by implementing volume I stimulus policies in the tourism sector, after banning flights to and from China in mid-February.

The government implemented discounts on domestic flight tickets and exemption from restaurant and hotel taxes. Initially, the stimulus also included incentives in the form of ticket discounts for international flights, but was later postponed as criticism rolled over the risk of spreading COVID-19 domestically from foreign tourists.

Then, the government continued with the economic stimulus volume II which contained fiscal and non-fiscal policies, primarily to support industrial activity. Included in the fiscal stimulus package are exemption from income tax (PPh) 21 for workers, postponement of Article 22 Import Income Tax, and reduction of Corporate Income Tax Article 25 by 30 percent. The stimulus applies to the manufacturing industry for six months.

Following this, the government issued a stimulus volume III. This time the stimulus will finally focus on managing health. Apart from that, there is also a social safety net for the community, and government support for the affected business industries.

"So from the start our government was worried about a recession. Not only a recession but also a crisis. Because from the start the focus of handling the COVID-19 pandemic was indeed on the economy. If the crisis is negative throughout the year, the growth is negative. Meanwhile, if the recession is negative for two consecutive quarters, "he said, when contacted by VOI, Sunday, July 19.

Not only that, Tauhid said, the government also chose this step because if what was enforced was a lockdown then the national economy would have fallen considerably.

"In fact, the President said that (imposing) our economic lockdown is minus 17 percent. In my opinion, it is too much, if the lockdown is minus to that extent. That means like the crisis 97-98 the economic growth is minus 13 percent," he said.

According to Tauhid, the lockdowns imposed in other countries were not enough to completely suppress the pandemic and their economy declined due to the lockdown policy. In fact, to enter into the abyss of recession.

However, he emphasized that Indonesia should not be complacent. Because, even though the PSBB was enforced, the number of new positive cases of COVID-19 was still high.

Furthermore, Tauhid admitted that he was not sure that the Indonesian economy would recover in the near future even though the government had relaxed the PSBB.

"Singapore and India have implemented a lockdown, then their economies decline. I think the PSBB pandemic has not been successful. But the economy may be felt to be recovering. But I am also not sure. Maybe according to Pak Airlangga we will not have a recession (because we did not implement a lockdown. ), so the difference is there, "he said.

Previously, the Coordinating Minister for the Economy Airlangga Hartarto assessed that the lockdown policy implemented by countries had a significant impact on suppressing economic growth compared to the Large-Scale Social Restriction (PSBB) policy. He said the economic growth of countries that implemented a minus lockdown was higher than Indonesia, especially in the second quarter of 2020.

Airlangga explained that some of the economic growth of countries that implemented a lockdown policy included: Malaysia minus 8.4 percent, Thailand minus 11.1 percent, the Philippines minus 7.6 percent, Singapore minus 12.6 percent, Brazil minus 11 percent, to India minus 20 percent.

"And of course Indonesia itself is expected to decline relatively better than the others, between minus 3.8 percent to 4.2 percent. There is even a prediction of approaching minus 4.5," he said, during the DigiKU launching webinar, Friday, July 17.

Airlangga also believes that Indonesia's economic growth will revive in the fourth quarter of 2020. Until now, the government is trying to improve economic performance amid the COVID-19 pandemic.

"It is estimated that World Bank growth in the fourth quarter will enter a positive path, and the government hopes that in the third quarter at least it can keep the situation from getting too deep, it can recover close to minus -1 or zero," he said.

President Jokowi said that national economic growth in the second quarter of 2020 is predicted to be minus 4.3 percent. This condition is due to the lack of recovery in the economy due to the COVID-19 pandemic.

Even so, President Jokowi said he was grateful because the minus 4.3 percent prediction was still luckier. This is because if Indonesia implements a lockdown policy, the national economy is predicted to be minus 17 percent.

"And very fortunate, our economic condition, although in the second quarter the growth is likely to be minus to 4.3 percent. In the first quarter we are still positive 2.97 (percent). I can't imagine if we used to lockdown it might be minus 17 (percent). ), "he said at the Bogor Palace as quoted on the Secretariat's website, Wednesday, July 15.