COVID-19 pandemic has precipitated a sharp decline in the global economy. Numerous countries have resorted to lockdown policies, confining their populations within national borders. These lockdowns, which can extend for months at a time, have severely restricted billions of people from engaging in economic activity.
Bank Indonesia has projected that economic growth in 2020 will fall below the initial forecast of 5–5.5 percent. The primary drivers of this downturn include the curtailment of production activities and economic activity in COVID-19-affected nations, reduced supplies of goods from other countries for production purposes, and the impact of lockdown measures on containing the virus’s spread. On the export front, trade volumes have declined and commodity prices have fallen considerably. Export activities have also been disrupted by the breakdown of global supply chains, which has led to shortages of intermediate goods from other countries.
Indonesia is currently experiencing a significant economic slowdown, a condition that could deteriorate further or improve, depending on the government’s capacity to take decisive action in containing COVID-19 and withstanding both domestic and global demand pressures. Should Indonesia succeed in resolving the crisis more swiftly, it will be better positioned to enter a period of economic recovery, even amid a global recession.
Several measures are available to the government in countering global economic pressures. These include maintaining the smooth supply of goods and essential commodities, expanding tax relief policies, realising credit facilities in line with the Financial Services Authority (OJK) recommendations, and widening the deficit budget even beyond conventional limits given the state of emergency.
We must remain optimistic that Indonesia’s economy will regain stability. Bank Indonesia Governor Perry Warjiyo has stated that the Indonesian economy is projected to rebound in 2021 and strengthen over the medium term. This outlook will be reinforced by three pillars: synergy, transformation, and innovation. All of which are essential in sustaining resilience and driving Indonesia’s economic growth.
Policy synergy across all institutions central and regional government alike as well as relevant authorities, constitutes a critical foundation for safeguarding economic resilience against the threat of COVID-19. The acceleration of economic transformation will be underpinned by synergies drawn from multiple sources, including the strengthening of the manufacturing and tourism sectors and the development of fundamental economic drivers.
Rapid economic transformation is achievable when strong synergy is in place. According to Gupta (1977), economic transformation involves raising the income of lower-income communities, thereby stimulating demand for both goods and services. Economic transformation also represents an ongoing effort to expand into the digital sector.
Innovation is indispensable in supporting economic growth within the digital sector. The digital economy will continue to develop through digital financial innovation, whereby payments are increasingly processed through financial technology (fintech). This shift serves the dual purpose of curbing the spread of COVID-19 while preserving the stability of the payment system. (*)
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*) By: Rio Era Deka, S.Pd., M.M., Postgraduate Student, Universitas Islam Malang
*) This column is the sole responsibility of its author, and was also published at timesindonesia.co.id
