Recovering from Recession

AFP/GOH CHAI HIN

Customers gather at a street stall in Jakarta on November 5, 2020, as Indonesia tumbles into first recession since the Asian financial crisis.

Even though Statistics Indonesia (BPS) data showed that Indonesia had entered a recession, we have ample room to make a quick recovery.

Indonesia has officially fallen into recession after BPS on October 5 announced that the economy had contracted 3.49 percent year-on-year (yoy) in the third quarter. In the second quarter, the econ-omy shrank by 5.32 percent yoy. The economic sector that was able to record positive growth was agriculture (2.15 percent yoy), and from the expenditure side it was government spending (9.76 per-cent yoy).

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Although the economy performed below expectation, there is still room for economic growth. Our country has large populations that serve both as a source of workers as well as potential market. We also have abundant natural resources located both in land and sea.

The government has issued a regulation in lieu of law concerning state budget and economic stabil-ity to mitigate the impacts of the COVID-19 pandemic. The budget deficit is set above the legal limit of 3 percent, and Bank Indonesia can buy government bonds in the primary market to support fiscal policy.

It also provides social assistance to half of the citizens, though the implementation is still not optimal.

To rescue micro, small, and medium enterprises (MSMEs), the government has restructured loans and provided working capital loans. It also provides social assistance to half of the citizens, though the implementation is still not optimal.

The government and the House of Representatives have enacted the Job Creation Law to boost in-vestment and create jobs. Now, we are waiting for the implementing regulations to create economic growth.

KOMPAS/ISMAIL ZAKARIA

A woman arranges a display of locally produced coffee on Thursday (23/7/2020) at a business meeting on micro, small and medium enterprises (MSMEs) in Mataram, West Nusa Tenggara (NTB). Local MSMEs have developed superior products from the NTB administration’s economic assistance for earthquake-affected communities. Today, MSMEs in Lombok have said they have been encouraged by the transition to the “new normal” phase of the Covid-19 mitigation measures.

One economic sector that continues to grow is agriculture. We should ensure the growth prospects of this sector by providing the required equipment and infrastructure; prioritizing domestic produc-tion over imports followed by improvement in quality, particularly for sugar, salt, and fruits; as well as strengthening downstream activities to create greater value added and penetrate the export mar-ket.

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Nevertheless, we still need to support MSMEs and big businesses that have been in trouble even be-fore the pandemic. The new normal will breed a new type of business that relies on technology, so improvement in education and workers reskilling need to be done. The government should encour-age entrepreneurship because it is the spearhead of the economy, creating growth through innova-tion and risk-taking.

Nobel laureate economist Joseph E. Stiglitz has reminded us that recession could worsen inequality, which in turn could hinder economic recovery. Therefore, we need to encourage inclusive economic recovery that is free from corruption and that is environmentally friendly to ensure sustainability.