Chatib Basri: Economic Growth In The Third Quarter Of 2020 Is Confirmed To Slow Down Due To Weak Purchasing Power

Senior economist, Chatib Basri. (Photo: Instagram @chatibbasri)

JAKARTA - Senior economist Chatib Basri predicts that Indonesia's economic growth in the third quarter of 2020 will still experience a slowdown in line with community activities that have not returned to normal due to the impact of the COVID-19 pandemic.

"For the third quarter of this year, there may still be a slowdown," he said in his personal Twitter account @ChatibBasri as quoted, Monday, August 31.

Chatib said that based on Google mobility data, it showed that people's mobility and activities had increased sharply after the opening of social restrictions. On the other hand, he said that the recovery of community activities after the PSBB easing did not last long because in June to August it returned to flat and slowed down.

"Perceptions of economic people have declined again," he said.

The former Minister of Finance explained that there are several factors in the decline in economic activity, namely weakening purchasing power and the behavior of the upper middle class who are cautious due to health.

Google mobility data shows that after the re-opening the mobility activity rose sharply, then flattened and slowed down. Data shows a slowdown in June-Aug. This is also consistent with the @saifulmujani survey that the perception of economic people has declined again pic.twitter.com/4g94H4MrJh

- M. Chatib Basri (@ChatibBasri) August 30, 2020

Not only that, changes in the consumption pattern of the people who currently tend to choose to shop through online platforms and the obligation to implement health protocols also prevent the economy from fully operating.

If the economy operates only 50 percent, for many sectors the break even point cannot be achieved. Companies can survive as long as they are able to pay variable costs such as salaries but are not profitable. Companies can be zoombie companies, "he said.

Meanwhile, he said the availability of the COVID-19 vaccine was also a supporting factor for recovery because before it was discovered, health protocols had to be applied so that the economy had to operate below 100 percent.

"With this condition, the recovery will be in the form of a U instead of V. Therefore, if there is no incentive to expand and increase investment, the economy will be stuck or the recovery will be slow," he said.

Available COVID-19 Vaccine, Faster Economic Recovery

He stated that the availability of the COVID-19 vaccine will affect the speed of Indonesia's economic recovery which is slowing down due to the impact of the COVID-19 pandemic. Chatib stated that this was in line with the obligation to implement health protocols which made people's economic activities unable to operate fully.

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"Before the vaccine is completed, health protocols must be implemented. This means that the economy must operate below 100 percent. With this condition, the recovery will be in the form of a U instead of V," he said.

Not only that, the former Minister of Finance said that once the vaccine is available, it will still take time to distribute to the public so that economic recovery cannot occur quickly.

"Try to make a simple calculation, for example a vaccine is available in January 2021, so how many people should get the vaccine first," he said.

He gave an example, the vaccine will be available in January 2021 and must be distributed to priority people, such as parents, totaling 25 million people a year.

That means there are 68 thousand parents who must be given the vaccine in one day for a year with 365 days, while the vaccine must be given twice to one person.

"If there are 25 million (people) and a year 365 days, then every day there must be 68 thousand people being vaccinated for a year. Can we afford to vaccinate 68 thousand people per day? I don't know," he said.

Therefore, Chatib said that the government could expand the existing incentives while waiting for the availability and distribution of vaccines so that the economy would not be increasingly depressed.

"There is no incentive to expand and increase investment. The economy will be stuck or the recovery will be slow," he said.

Try to make a simple count. If eg vaccine is available Jan 2021. So how many people should get the vaccine first. For example, only old people or those who are orbits. For example: the number is 25 million people (this figure is very conservative)

- M. Chatib Basri (@ChatibBasri) August 30, 2020

Moreover, Chatib estimates that the national economy in the third quarter of this year will still be under pressure as public activity tends to slow down again in June to August.

"If the economy operates only 50 percent, for many sectors the break even point will not be achieved," he said.

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