Projection For 2021: There Is A COVID-19 Vaccine, Will Indonesia's Economy 'Recover'?

Illustrated. (Achmad Basarrudin / YOU)

JAKARTA - Indonesia now has three million doses of imported COVID-19 vaccine made by a Chinese pharmaceutical company, Sinovac. This step has received attention from various parties, because the Sinovac company has yet to issue an official statement regarding the efficacy of its vaccine against COVID-19. However, the government believes vaccination can encourage the economy to 'heal' faster.

As is known, the three COVID-19 vaccines consist of 1.8 million imported in the second wave on Thursday, December 31. Previously, 1.2 million doses of vaccine arrived in Indonesia on December 6.

The plan is, if there is no obstacle, the government will launch the first phase of the COVID-19 vaccine starting from January to April 2021. The Ministry of Health (Kemenkes) has prepared procedures for implementing the vaccination.

The presence of the COVID-19 vaccine turns out to be able to encourage positive sentiment. One of them is the rupiah value. At the end of 2020, the rupiah closed up 80 points at the level of 14,050 per US dollar compared to the previous level of 14,130 per US dollar. It is estimated that in early trading in 2021, the rupiah opened up at the level of 14,040 to 14,080 per US dollar.

Director of PT TRFX Garuda Berjangka Ibrahim Assuaibi predicts that the rupiah exchange rate throughout 2021 will be around IDR 13,500 to IDR 15,000 per US dollar. The rupiah is estimated to reach its lowest point in the first quarter.

"I am optimistic, because Indonesia has entered a new normal period," he said, in Jakarta, Friday, January 1.

Previously, Ibrahim Assuaibi said that the year-end trade conditions that showed the rupiah strengthened were triggered by a government policy to conduct a national vaccination program. The vaccines that have been injected into the community have made the economy spin again. At the same time, the pace of investment has started gradually.

"Seeing the government's optimistic planning for vaccine immunization, market players are happy again and respond positively to future economic growth which will improve again," he told reporters in Jakarta, Wednesday, December 30, 2020.

JCI roller coaster in 2020. (Raga Granada / VOI)

Not only the rupiah exchange rate, the Jakarta Composite Index (JCI) also has the potential to strengthen in 2021 to reach the 6,500 level. Potentially even higher. Coordinating Minister for the Economy Airlangga Hartarto said there were two factors that could bring JCI to move better this year.

First, from the economic side, there is Law Number 11 of 2020 concerning Job Creation (Ciptaker) aka Omnibus Law which will provide business convenience for investors who want to invest in Indonesia.

Second, from the health side, the provision of free vaccinations and implementation of health protocols are priorities to increase public confidence in carrying out socio-economic activities.

According to Airlangga, the planned implementation of vaccination in 2021 will provide a positive sentiment for the economy.

"Of course with vaccination planning in 2021 it is hoped that Covid will be prevented and it will increase community mobility and community mobility. This will certainly encourage economic activity," he said, in his speech at the closing of trading at the Indonesia Stock Exchange (IDX), Wednesday, December 30, 2020.

The former Minister of Industry said with this positive sentiment, even JPMorgan also projects that the JCI will reach a record high of up to 6,800 in December 2021.

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"In line with the economic improvement, the JCI and our exchange rate are expected to continue to strengthen in 2021," he said.

Vaccination Does Not Automatically Restore the Economy

Senior researcher at the Institute for Development of Economics and Finance (Indef) Enny Sri Hartati said that even though the vaccine had arrived in Indonesia, it did not automatically change economic conditions.

According to Enny, there are at least two things that can affect the movement of the national economy. First, if the government is able to deal with COVID-19, various economic activities will gradually recover.

"For example, some sectors that have been closed, such as hotels, modern retail trade, cafes, transportation and tourism, may gradually return to normal," he said in a virtual Indef discussion forum, Wednesday, December 23, 2020.

Second, Enny said, although Indonesia has a smaller percentage of economic contraction compared to Singapore and Malaysia which reached double digits, it must be noted that the impact of COVID-19 in the country has an effect on the structure of employment and the structure of the economy.

Vaccine for COVID-19. (Photo: Unsplash)

Furthermore, Enny explained this was because the proportion of Indonesia's economic growth was very clear and within the next year the proportion of Indonesia's economy would not change. Where the largest contribution, namely household consumption and investment, has not yet recovered.

"So if we want to talk about the expectations or the face of the economy in the future, in a short time, of course we cannot be separated from the two main contributors," he said.

Enny also said that the impact of the COVID-19 pandemic has greatly affected household consumption, which is the main support for economic growth. Therefore, an increase in the unemployment rate also affects economic growth.

"So Indonesia, with the presence of COVID-19, has an impact on unemployment, why? Because this unemployment rate is the main function of returning people's purchasing power. Household consumption is determined by people's purchasing power, people's purchasing power is largely determined by employment," he said.

Meanwhile, the impact of the COVID-19 pandemic on open unemployment as of August 2020 from 7.10 million people to 9.77 million people. This means that there are an additional 2.7 million people.

Meanwhile, Minister of Finance Sri Mulyani Indrawati said the public still needed to apply health protocols, even though the import of the COVID-19 vaccine made by Sinovac Life Science Corporate Ltd China had arrived in Indonesia. This is because vaccines do not necessarily control COVID-19.

"Even though we have imported the vaccine now, it does not mean that in the very near future the COVID will be controlled," he said in a virtual discussion, Friday, December 11, 2020.

The government, he continued, will start vaccinating at the end of 2020. However, the economy in 2021 will still be a big challenge so that the government continues to provide a lot of stimulus to encourage economic recovery, ranging from social assistance, MSME support, to incentives for the business world.

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Apart from importing vaccines, the state treasurer said the government also supports the development of domestically made vaccines, the Red and White vaccine. This includes encouraging the production of other medical devices to tackle the COVID-19 pandemic.

"We support vaccine research, this is the Red and White vaccine. For personal protective equipment, now it is produced domestically, many physical tests have also been produced in the country. This is expected to increase Indonesia's capacity and at the same time to restore the economy," he said.

Job Creation Law Can Improve Ease of Doing Doing Business in Indonesia

The presence of the Omnibus Law on the Job Creation Law is a government strategy to encourage economic growth through regulatory reform in the business licensing sector in the context of increasing investment.

In addition, the government claims that this law was also drafted to resolve barriers to investment, especially due to the long bureaucratic chain, overlapping regulations, and the many regulations that are not harmonious, especially in regional and central regulations.

The Job Creation Law has also triggered many foreign companies to dock in Indonesia. For example, the United States has been eyeing eastern Indonesia. Australia will also process power plants in Papua and Kalimantan.

As is well known, so far foreign companies have chosen Vietnam, Cambodia and Thailand to be locations for direct investment. However, the existence of the Job Creation Law which has regulated permits to workforce makes investors feel valued.

Analyst and Director of PT TRFX Garuda Berjangka, Ibrahim Assuaibi, assessed that foreign investors are increasingly optimistic about the existence of Law Number 11 of 2020 concerning Job Creation.

"The passage of the Job Creation Law brings a breath of fresh air to Indonesia, especially in the investment sector. This law makes foreign investors trust Indonesia as a potential country to invest," he said, in a written statement received in Jakarta, Thursday, December 31, 2020.

According to him, in addition to providing guarantees for ease of investment, through this law, the government also cuts complicated licensing. The impact of the law has actually improved investor confidence. Moreover, there are a number of articles in the investment cluster that make it easier for potential foreign investors to invest in Indonesia.

Vaccination Optimistic Entrepreneurs Can Support Retail Business Growth

The Indonesian Retail Entrepreneurs Association (Aprindo) is optimistic that the growth of the retail business in 2021 will be better than in 2020. This is in line with the entry of vaccines and vaccination plans which will soon be realized.

Photo: Matahari Dept. Store

"Retail hopes we can (grow at) 4 to 4.5 percent, hoping it will happen in 2021," said Chairman of Aprindo Roy N Mandey in a webinar entitled 'Outlook Festival 2021: Awakening from Pandemic and Recession', Wednesday, December 16. .

Roy also hopes that the positive sentiment that has occurred in recent times will be able to support retail growth next year. Even so, he acknowledged that this growth is believed to have not been able to match the growth achievements that occurred before the COVID-19 pandemic.

"Measuring and seeing how vaccines are implemented so that the response to COVID can be fast and people can return to health and activity," he explained.

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