CORE: The Government Should Not Only Think About Recession Techniques, But Also Focus On Controlling COVID-19

Illustrated. (Irfan Meidianto / VOI)

JAKARTA - The weakening of people's purchasing power and a decrease in the activity of MSMEs are a matter of concern for the Indonesian economy. This is because the national economy is supported by people's purchasing power. This means that if purchasing power weakens, it will certainly have an impact on economic growth.

Executive Director of the Indonesian Center of Reform on Economics (CORE) Mohammad Faisal said, seeing the development of the pandemic and the current economic situation, an economic recession is indeed very difficult to avoid. One by one the countries entered into the abyss of recession.

"Indonesia's economic growth is predicted to contract (in the negative zone) by the end of the year, but it is shallower than in the second quarter of this year," he said, during a virtual discussion, Thursday, September 17.

Faisal reminded the government not to focus too much on the technical definition of a recession. According to him, in the current crisis conditions what is important is how to reduce the negative impact on the economy during the pandemic and encourage the acceleration of recovery in the future.

Furthermore, Faisal said, Indonesia's economic recovery would not proceed quickly if the government could not control COVID-19. The number of COVID-19 developments in the country continues to increase, and this is worrying.

"So the number of cases of our tests has increased when compared to many other countries. Our comparison with Malaysia, South Korea, Vietnam, the Philippines is much lower. This means increasing our risk from an economic point of view. Indeed, we still have a lot of homework in dealing with the outbreak," he said.

According to Faisal, countries that have succeeded in tackling the COVID-19 pandemic in their countries will recover much faster. In fact, it can avoid a recession.

"So the one who overcomes the outbreak faster, he can recover faster and can also avoid a recession. Even if we look at the two countries China and Vietnam they did not experience any contraction at all in the second quarter," he said.

Even so, Faisal estimates, in 2021 there is a big possibility that economic growth will be positive again. However, how fast the economy recovers will depend on the speed with which the outbreak is contained.

"The potential for future economic recovery is there but the improvement is seen from how fast the government deals with the outbreak," he said.

Furthermore, Faisal said, the Organization for Economic Co-operation and Development (OECD) projects that at a global level the potential for economic recovery can be faster. The world economic growth in 2021 is better corrected.

"Compared with the previous projection, it was minus 6 percent for this year. Now it is getting better at minus 4.9 percent and next year it will rebound to 5.4 percent," he said.