Kaleidoscope 2020: Indonesia's Economy Is 'exposed' And 'exposed' Due To COVID-19

Ilustrasi. (Raga Granada / YOU)

JAKARTA - The year 2020 is only a few days left. Over the past year, the world has had to confront and fight the COVID-19 pandemic. This virus has succeeded in battering all sectors, and has even made the global and national economies grow in the negative zone.

Let us review the traces of the COVID-19 pandemic, since the virus was first confirmed to be present until it spread to Indonesia. COVID-19 was first confirmed by the offices of the World Health Organization (WHO) in China on December 31.

The Chinese authorities and WHO concluded in mid-January 2020 that the virus that was attacking was the corona virus. Viruses from the same family as SARS and MERS. This virus is named 2019-nCoV. However, the WHO changed the name on February 19, 2020 to SARS-CoV-2.

On March 2, President Joko Widodo (Jokowi) and Terawan Agus Putranto, who was then Minister of Health, announced that the first cases of COVID-19 were found in the country. At that time, there were two people who were confirmed positive. The two of them had contact with Japanese citizens who came to Indonesia.

Since then, COVID-19 cases in Indonesia have continued to increase. During the 10 months of the COVID-19 pandemic in Indonesia, it has reached 650,000 cases, and those who died from the virus have reached 20,000 people.

Rupiah and IHSG Dropped Deeply

The COVID-19 pandemic has not only attacked the health side, but also the world economic sector, including Indonesia. The rupiah exchange rate plummeted against the US dollar on Friday, March 13 trading. This is due to the deteriorating sentiment of market players which has triggered massive selling.

In that period, the rupiah exchange rate collapsed by 2.07 percent to Rp. 14,810 per US dollar. This level was the weakest since November 13, 2018. Most major Asian currencies weakened against the US dollar during this trade, but the rupiah was the worst hit.

The rupiah exchange rate against the United States (US) dollar weakened further on the spot market trading on March 19 at 14:52 WIB, the rupiah weakened to Rp15,850 per US dollar. Compared to the previous day's trade closing position, the rupiah weakened 4.28 percent.

The rupiah continued to weaken until it reached Rp16,575 per US dollar on March 23, which was the lowest position since the beginning of the year. After reaching the deepest position, the rupiah tended to fluctuate, but remained perched at the level of around Rp. 16 thousand.

This condition is caused by market concerns about the economy. This is because almost all countries have carried out regional lockdowns and social restrictions so that economic activity seems to be suspended animation. As a result, market players have shifted their assets from developing countries to developed countries that are considered safer, namely the US.

The new rupiah left the level of IDR 16 thousand on April 9 to the level of IDR 15,880 per US dollar. Finally, the rupiah returned to its position of Rp. 14,000 on May 6, to be precise, Rp. 14,995 per US dollar.

Currently, the rupiah continues to be consistently at the level of around Rp. 14 thousand. As of December 23 trading, the rupiah exchange rate against the US dollar edged up by 5 points or 0.03 percent to 14,200. The strengthening of the rupiah coincided with the appreciation trend in Asian currencies against the US dollar.

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The condition of the composite stock price index (IHSG) is not much different. Since the beginning of the year until trading on December 8, the JCI was corrected by 5.64 percent to the level of 5,944. In fact, the JCI managed to strengthen to the level of 6,283 when opening trading at the beginning of the year.

Infographics on the ups and downs of the JCI in 2020. (Raga Granada / VOI)

The position of the 6,000's was still maintained during January. However, at the end of January the JCI started to leave this level at 5,940. The stock index continued its decline, leaving the 5,000s level to 4,895 on March 12.

This condition made the market chaotic, even the Indonesian Stock Exchange (IDX) had several times held temporary trading freezes or trading halt following up the Order of the Head of the Capital Market Supervision Department 2A of the Financial Services Authority.

This was done because of concerns that panic over COVID-19 would cause investors to flock to leave the capital market. Based on that decision, in case of a very sharp decline in 1 day, the halt trade will be set.

If the JCI decline reaches 5 percent, a 30-minute halt trade will be carried out. However, if the JCI has decreased by 5 percent, halt trading is done again in 30 minutes, and the same thing is done again if it has decreased by 10 percent. In addition, trading suspend is also applied if the JCI drops by 15 percent.

Since the policy was enacted, at least six shares trading has been subject to halt trading, because it has plunged more than 5 percent, namely on March 12, March 13, March 17, March 19, March 22, and March 30, 2020.

As a result, on March 24, 2020, the JCI had touched the level of 3,937. In fact, at the beginning of the year JCI was at the level of 6,300s. However, on March 26, 2020, the JCI reversed and rose so high that 10.1 percent to the level of 4,338.

Halt trading occurred again when COVID-19 cases increased after the PSBB easing was enforced. On September 10, 2020, the JCI dropped 5 percent or weakened 257.5 points and stopped at the level of 4,891.88.

However, the effect of the Jakarta PSBB announcement was only for one day. Because, in trading Friday September 11, the JCI closed up 2.56 percent and returned to the level of 5.016.

The upward trend in the JCI continues. At its peak, JCI returned to the level of 6,012 on Monday, 12 December. However, on December 24th inflammation, the JCI closed down 14 points or 0.24 percent to the level of 6,008.

Second Quarter Economic Growth Contraction

As a result of the COVID-19 pandemic, Indonesia's economic growth in the second quarter of 2020 contracted deeply. The Central Statistics Agency (BPS) recorded economic growth of minus 5.32 percent on an annual basis or year on year (yoy).

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Head of BPS Suhariyanto said that this figure increased worse than the first quarter of 2020 which reached 2.97 percent and the second quarter of 2019 of 5.05 percent. Indonesia's Gross Domestic Product (GDP) based on constant prices in the second quarter of 2020 amounted to IDR 2,589.6 trillion.

"So the Indonesian economy in the second quarter of 2020 yoy compared to the second quarter of 2019 with a contraction of 5.32 percent. If we compare it to the first quarter of 2020 q-to-q, Indonesia's economic growth contracted minus 4.19 percent," he said in a press conference. virtual, Wednesday, August 5.

Meanwhile, he continued, cumulatively in the first semester of 2020 against the same period last year, contracted by 1.26 percent. The contraction of 5.32 percent was the lowest since the first quarter of 1999. At that time, the Indonesian economy contracted by 6.13 percent.

Economic growth in the second quarter of 2020 was also the worst since the 1998 crisis. At that time, Indonesia's growth was minus 16.5 percent throughout 1998. Meanwhile, in the second quarter of 2008, when the global financial crisis hit, Indonesia was still able to grow 2.4 percent. Then as a whole throughout the year during the 2008 crisis, the Indonesian economy could still grow 6.1 percent.

This BPS announcement also confirmed that the contraction in the second quarter of 2020 was deeper than the Ministry of Finance predicted in the range of minus 3.8 percent. In fact, it is worse than the lower limit of the Ministry of Finance's prediction of minus 5.1 percent.

Suhariyanto said that the economic growth in the second quarter of 2020 was caused by contractions in various components. One of them is from the expenditure component.

Meanwhile, Minister of Finance (Menkeu) Sri Mulyani Indrawati said the economic contraction in the second quarter of 2020 was due to the implementation of a large-scale social restriction (PSBB) policy which caused limited economic activity.

Sri said, from April to May 2020, economic activity was barely moving. Thus, consumption, which is the largest contributor to economic growth, was unable to grow positively in the second quarter of 2020.

Nevertheless, the relaxation of the PSBB policy in June 2020 gave a signal for the return to economic activity. However, it actually has not been able to support economic growth in the second quarter of 2020.

"We continue to pay attention to economic dynamics and their impact on financial system stability. In addition to analyzing existing data, we continue to design to minimize the impact of COVID-19 on economic activity and the financial sector," he said at a press conference of the Financial System Stability Committee (KSSK), Wednesday, August 5.

Omnibus Law on Cipta Kerja Published

In the midst of the crisis caused by the COVID-19 pandemic, the government and the House of Representatives (DPR) are continuing to discuss the Ominus Law Job Creation Bill (RUU). In fact, there are not a few who reject the existence of this global sweeping law.

On October 5, this regulation was officially passed. Coordinating Minister for the Economy Airlangga Hartarto believes that the passage of this law during the COVID-19 pandemic is the right step. Because, he believes the Omnibus Law can be a reversal to the economic conditions that have already fallen as a result of the pandemic.

"The Work Creation Law which has been passed is expected to encourage job creation and this is a game changer for medium to long term, which will certainly create higher quality jobs," he said at the Business, Finance & Accounting Conference held by IAI, Tuesday. , December 8th.

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Airlangga said, the existence of the Job Creation Law could be a solution to the problem of unemployment in Indonesia. Because according to him, this law could create new jobs to absorb the unemployed who were hit by the storm of layoffs during the pandemic.

In addition, said Airlangga, he believed that the global sweeping law could also facilitate the business climate and encourage small and medium enterprises to become safety nets and post-pandemic safety.

"The time this law is passed is felt right, because it will help reduce the negative impact on the number of people losing their jobs, amounting to 29.12 million people of working age," he said.

The figure of 29.12 million is the number of working-age population affected by COVID-19 as released by BPS, not those who have lost their jobs due to the pandemic. Of the total working age population of 203.97 million people, the percentage of the working age population affected by COVID-19 was 14.28 percent.

The former Minister of Industry hopes that the clusters in the Job Creation Law are expected to encourage increased investment, boost competitiveness, and provide protection for workers.

Furthermore, he said, the government had completed the derivative regulations of the Job Creation Law and provided the widest possible opportunity for the public to provide input and suggestions in preparing the formulation team for the entire implementation of the Job Creation Law. As well as having formed an aspirational team which is expected to work in the next 2 months.

Indonesia Officially Recession

The not over time of the pandemic has pushed many countries into economic recession. One of them is Indonesia. After many predictions, Indonesia finally entered into a recession in the third quarter of 2020, where Indonesia's economic growth was minus 3.49 percent on an annual basis or year on year (yoy).

Indonesia is experiencing a recession after two consecutive quarters of negative economic growth. In the second quarter of 2020, Indonesia's economic growth was already minus 5.32 percent.

One of the causes of Indonesia's slumping economic growth is believed to be due to weak purchasing power. BPS data shows that household consumption still contracted by minus 4.04 percent (yoy) in the third quarter of 2020.

Indonesia is entering into the brink of recession. (Raga Granada / VOI)

Meanwhile, household consumption in the second quarter of 2020 also touched the level of minus 5.52 percent (yoy). However, household consumption in the third quarter of 2020 was stated to be better than the previous quarter, which grew 4.70 percent (qtq).

Research Director of the Institute for Development of Economics and Finance Berly Martawardaya explained that the economic recession due to the COVID-19 pandemic not only brings bad effects, but also provides many opportunities.

"In fact, there are many opportunities in the crisis. Do not just look at the dangers but also see the potential. One of them is the opportunity for an inclusive and sustainable economic transformation," he said, in a virtual discussion, Friday, November 13.

Likewise, Plt Deputy for Investment Planning at the BKPM, Nurul Ichwan, is pushing for the improvement of the investment climate amid the pandemic. Despite experiencing a recession, Indonesia must be able to seize investment opportunities. Because, this was able to save Indonesia from a deeper recession.

"In the midst of a slowing economy, investment is expected to be the main driving force and drive Indonesia's economic growth. Therefore, BKPM will continue to work hard in attracting investment into Indonesia," said Nurul.

Economic Sector Hit The Business World, Especially Retail

The pandemic that initially hit the health sector began to spread to various sectors, including the economy. Due to the limited mobility of the people and the decline in the level of consumption, the business world is battered, especially retail.

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Retail stores and shopping centers or malls are starting to collapse one by one amid the COVID-19 pandemic. Most recently, Golden Truly Mall officially closed its operations on December 1, 2020.

The Association of Indonesian Shopping Centers (APPBI) said the cause of shopping centers, or in this case the Golden Truly, was due to pressure from large-scale social restrictions (PSBB) policies.

As is known, during the transitional PSBB period in Jakarta, markets and malls were allowed to operate with a maximum of 50 percent of capacity. Market operating hours are regulated by the market manager. Shopping centers and malls operate from 09.00-21.00 WIB.

Deputy Chairman of the Indonesian Shopping Center Management Association (APPBI) Alphonzus Widjaja said that the condition of shopping centers is still in a bad condition. This is because the level of visits is still very low and people's purchasing power has not yet recovered.

"Many regions also limit visitors to shopping centers by 50 percent of capacity. Even if the maximum limit is reached, it will not cover operational costs," he said, when contacted by VOI, Wednesday, December 2.

According to Alphonzus, after the transition to the PSBB in the Capital Region, the capacity of mall visitors has never reached the maximum limit, which is 50 percent. Another factor that causes the collapse of shopping centers is the ability of each shopping center to survive differently.

Previously, PT Matahari Department Store Tbk (LPPF) also closed its outlets until the end of 2020. The total outlets that have been closed are 13.

In a report to the Indonesia Stock Exchange on Saturday, November 28, 2020, the company with the ticker ticker LPPF stated that 6 outlets were planned to be closed.

The details are as many as 4 outlets in Java, 1 in Bali, and 1 on Sulawesi Island. "Thus, the number of our outlets that will operate at the end of 2020 will be 147 from the previous 153," said the management statement.

The company also ensures that it will not open new outlets in the fourth quarter of 2020 and the first quarter of 2021.

Then, PT Ramayana Lestari Sentosa Tbk (RALS) was also forced to go out of business. Ramayana admits that COVID-19 causes company sales to decline.

Ramayana Lestari Sentosa's Finance Director, Suryanto, said that during the emergency response period for the spread of COVID-19, the company had temporarily closed some shops, until conditions allowed them to reopen.

Not only closing the operations of the Depok Ramayana outlet in connection with the spread of the COVID-19 outbreak that has hit Indonesia. The company also took termination steps (PHK) for the 84 employees who were at these outlets.

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Swedish fashion retailer H&M has also announced that it will close 170 stores worldwide this year, or about 40 percent of its stores. The exact affected locations have not been announced. H&M reported a 50 percent drop in sales during the second quarter of 2020. As stores closed during a worldwide lockdown.

Not only H&M, Victoria Secret also plans to permanently close 250 stores in the US and Canada in the coming months. This will happen until at least 2022.

A fashion store under the Zara brand is also experienced, Inditex will close 1,200 stores worldwide by 2021. Instead, it will focus on expanding its larger stores. The company also plans to encourage online business. The Spanish clothing retailer targets a quarter of its sales to come online by 2022.

Executive Director of Retailer Services Nielsen Indonesia Yongky Susilo predicts that retailers that are victims of the pandemic are not over. He felt that there would be more that would close his shop. This is if the COVID-19 pandemic does not stop.

Yongki explained that the retail industry has been in a state of pressure in recent years. The lowest period of performance in this industry was during the presidential election.

"The point is that our retail has been really slow for a long time. When the election fell, it is common for people to be afraid of shopping," he said.

Last year, said Yongki, the retail industry started to rise a little. Unfortunately, suddenly the COVID-19 pandemic emerged. The pandemic has limited the movement of people. In fact, the middle to upper class people today still tend to be afraid to shop and choose to pile up their money in the bank.

Retailers that have had to close several outlets due to the COVID-19 pandemic. (Raga Granada / VOI)

This condition makes it difficult for retailers to get income. While they still have to pay expenses, ranging from employee salaries, rent, to taxes. "Finally, the cash flow runs out, I can't stand it anymore," he said.

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