Indonesia is again experiencing deflation, a sign that purchasing power remains weak. The government’s economic stimulus package needs to hit the right target and must be disbursed efficiently.
By
Sumardiansyah
·3 minutes read
Indonesia is again experiencing deflation, a sign that purchasing power remains weak. The government’s economic stimulus package needs to hit the right target and must be disbursed efficiently.
Deflation over three consecutive months, as per the announcement of Statistics Indonesia (BPS) on Thursday (1/10/2020), shows that the negative impacts of the Covid-19 pandemic will continue to persist for a long time. Core inflation, which has continued to fall since March 2020, shows that purchasing power has continued to weaken.
Earlier on Tuesday (29/9/2020) in the October 2020 edition of the East Asia and the Pacific Economic Update, the World Bank (WB) released a baseline projection that Indonesia\'s economy would contract by 1.6 percent. The Indonesian economy could contract by up to 2 percent if its Covid-19 response showed no real improvements. In June 2020, the World Bank maintained its projection that our economy would grow zero percent.
Indonesia has a relatively better macroeconomic condition compared to many other countries. To fight the recession in the East Asia and Pacific regions. We can drive production and consumption while maintaining human capital.
We must immediately bring the Covid-19 epidemic under control in line with the World Health Organization (WHO) standards. We don\'t want to lose the opportunities of the current demographic dividend and fail at becoming a high-income country by 2045.
At the same time, investment must be facilitated while protecting workers in the real sector, which absorbs many workers. Access to financing for businesses, including assistance for micro, small and medium enterprises (MSMEs), must be increased amid the ongoing social restrictions. Developing human capital must continue. Public health services, including mandatory vaccinations for children under 5, must go on. Optimizing the role of posyandu (integrated health services posts) is the responsibility of local administrations.
Balanced nutritious foods must be available and accessible to all people, not just be sufficient in terms of national figures.
BPS data shows that expenditure in the food sector is one of the causes for the September 2020 deflation. Balanced nutritious foods must be available and accessible to all people, not just be sufficient in terms of national figures. Local administrations must expand food production and the food industry in their regions.
Online learning has affected the quality of education. This must be resolved so the quality of Indonesian people does not decline. The World Bank recommends proceeding with infrastructure development and widening the tax base to finance development projects. The development of physical and digital infrastructure must go hand in hand to accelerate economic activities that have been disrupted by Covid-19.
Increasing the ratio of tax to gross domestic product (GDP), such as by expanding the tax base, remains an outstanding task. Taking advantage of the demographic bonus by supporting young entrepreneurs will increase the taxpayer base. We need to be careful in determining who, how and when tax is expanded or raised, because this will affect private consumption and investment.
The World Bank merely provides feedback; it is we who are the policymakers. We still have the potential to implement policy appropriately, quickly, and efficiently.