Jump in Covid-19 Cases Hinders Economic Recovery

KOMPAS/RIZA FATHONI

Health workers gather on Sunday outside Grand Cempaka Business Hotel in Cempaka Putih, Central Jakarta, to board a Transjakarta bus that will shuttle them to several city-owned hospitals in the capital. The Jakarta administration is providing accommodation at three city-owned hotels for 638 health workers who are treating Covid-19 patients at several regional general hospitals (RSUD), including Tarakan, Pasar Minggu, Duren Sawit and Koja hospitals.

Public health must be prioritized to open up economic activities and move toward recovery. As Covid-19 cases continue to rise, economic recovery will be limited.

JAKARTA, KOMPAS — The Indonesian economy is improving and entering the recovery stage. However, economic recovery poses uneven risks in all business sectors because Covid-19 has not been resolved. If Covid-19 cases continue to rise, the economic recovery will be increasingly limited.

World Bank Chief Economist for Indonesia Ralph van Doorn said Thursday (17/12/2020) that the domestic economy was recovering slowly as of the second half of 2020. The recovery was supported by the opening of economic activity in stages at the national and global levels so that the rate of contraction slowed down.

Also read: “Long Covid”, the Covid-19 Aftermath

Statistics Indonesia (BPS) recorded that the Indonesian economy in the third quarter of 2020 had grown by minus 3.49 percent, not as deep as in the second quarter of 2020, which was minus 5.32 percent.

However, according to Van Doorn, the impact of the Covid-19 crisis continues to be felt. Domestic demand is still much weaker than before the crisis.

The condition was exacerbated by a surge in unemployment and underemployment rates.

As of September 2020, the level of demand was 2.8 percent below the same period last year. The condition was exacerbated by a surge in unemployment and underemployment rates.

"A number of sectors are starting to recover, but several others are still under pressure because their activities depend on physical contact. Indonesia must be aware of the uneven recovery speed in all sectors," he said in the virtual launch of a report on the December 2020 edition of Indonesia\'s Economic Prospects.

Also read: Long Holidays Anticipated, Regional Administrations Urged to be Firm

According to Van Doorn, the sector that recovered the slowest included businesses that required intensive physical contact and face-to-face interaction with consumers. Included in this sector are transportation, hotels, wholesale and retail trade, construction and manufacturing. The World Bank projected that these sectors will find difficulty to recover in the short term or around two years.

KOMPAS/PRIYOMBODO

Aerial photo of Wisma Atlet Kemayoran, Central Jakarta, Thursday (19/3/2020). The government plans to use the Wisma Atlet as an alternative quarantine place for Covid-19 patients. Related to this plan, the security of the area began to be increased. A number of preparations have also begun, such as inspection of the building and cleaning of the environment around the building by cleaning staff.

On the other hand, sectors that are recovering rapidly and in line with the global trajectory include finance, education, as well as communications and telecommunications.

Public health

Van Doorn emphasized that Indonesia must continue to prioritize public health if it wants to open up economic activities and move towards recovery. Health policy focuses on improving the testing and contact tracing system and on steps to prepare for procurement and administration of the vaccines. "If cases of Covid-19 infection continue to rise, the course of economic recovery will be increasingly limited," he said.

Based on the daily report of the Covid-19 Mitigating Task Force on Dec. 17, 2020, there were 7,354 new positive cases of Covid-19 with 142 deaths and 4,995 recuperation cases. It was also reported that 510 regencies/cities have been affected by Covid-19 so that only four regencies/cities have been declared not affected by this disease.

The community is also advised to not travel long distance during the long year-end holidays.

Covid-19 Mitigation Task Force spokesperson Wiku Adisasmito expects regional governments to also anticipate the potential for an increase in community mobility. The community is also advised to not travel long distance during the long year-end holidays.

Projection cut

In the report of the December 2020 edition of Indonesia\'s Economic Prospects, the World Bank cut its projection for Indonesia\'s economic growth in 2020 to minus 2.2 percent. Previously, in September 2020, the Indonesian economy was projected to grow minus 1.6-2 percent in the worst scenario.

Also read: Problems Related to Covid-19 Vaccines

World Bank Country Director for Indonesia and Timor Leste Satu Kahkonen said that the journey of Indonesia\'s economic recovery will be very long and full of challenges. Therefore, public health policies are the key to recovery efforts in the short, medium and long term.

The arrival of vaccines to Indonesia is indeed a beacon of hope. However, there is still lingering uncertainty about the vaccines.

DOKUMENTASI PRIBADI

Futri Dewi Sari, 33, a volunteer health worker, examines a patient at the Wisma Atlet Covid-19 Emergency Hospital in Jakarta.

Thus far, the efficacy, durability and reach of existing vaccines are not yet known. Vaccine procurement and vaccination systems are also unknown. "Complex efforts in the vaccination program are needed. The population of Indonesia is hundreds of millions and located on hundreds of islands,” he said.

On the other hand, the Governor of Bank Indonesia (BI), Perry Warjiyo, was optimistic that Indonesia\'s economic recovery is ongoing and in line with the trajectory. In the fourth quarter of 2020, the performance of investment, exports and household spending will be better than the two previous quarters.

To support the recovery, BI will continue its accommodative monetary policy with low interest rates. This December, BI has maintained the BI 7-day Reverse Repo Rate at 3.75 percent. "The low interest rate policy is still being expedited so that liquidity in the market remains adequate," he said.

Perry added that BI would also finance the purchase of vaccines through the mechanism of purchasing government securities (SBN) with a burden sharing scheme. Based on a joint decree with the Finance Ministry on July 7, 2020, the central bank has purchased SBN amounting to Rp 397.6 trillion.

The government can still take advantage of the remaining proceeds from burden sharing in 2020 which have not been fully spent.

The budget can still be optimized because the 2021 State Budget Law regulates that the remaining 2020 SBN purchase budget can be used again in the 2021 budget year. "The government can still take advantage of the remaining proceeds from burden sharing in 2020 which have not been fully spent. We also fully support for the remaining funds of Rp 30 trillion-Rp 39 trillion to be prioritized for buying vaccines," said Perry.

Also read: Preventing a Surge in New Cases

An economist from the Institute for Economic and Social Research, School of Economics, University of Indonesia, Teuku Riefky, was of the opinion that the overall economic recovery is uncertain because it is influenced by health problems and the efficacy of vaccines in the future. If vaccination implementation and distribution of the vaccines are effective, recovery can occur immediately.

KOMPAS/AGUS SUSANTO

Medical workers man the Covid-19 rapid testing post at Pasar Minggu Regional General Hospital (RSUD) on Saturday (4/4/2020) in South Jakarta. Pasar Minggu hospital, which has been providing the Covid-19 testing facility since 20 March 2020, is one of several referral hospitals that have been designated in Jakarta for treating suspected cases of Covid-19 infection, people under monitoring (ODP), and patients under surveillance (PDP).

"However, if the pandemic condition gets worse and there is the potential for tighter social restrictions, investor confidence will decline," said Riefky. (KRN/DIM/TAN)