Learning from the Pandemic in 2020, Don’t Do Business As Usual in 2021

The world was suddenly faced with many problems due to the Covid-19 pandemic. Many countries are struggling to fight the disease, including addressing its impact on health, the economy and humanity.

The world was suddenly faced with many problems due to the Covid-19 pandemic. Many countries are struggling to fight the disease caused by the SARS-CoV-2 virus, including addressing its impact on health, the economy and humanity.

The pandemic has created new uncertainties. The world was already trapped in various uncertainties, among others, in the form of geopolitical tensions and the United States-China trade war.

Also read: 2021: Between Pandemic and Economic Recovery

In Indonesia, the Onward Cabinet, which is only as old as a corn crop, has had to face multiple problems. The pandemic has caused a health crisis to turn into an economic crisis.

So far, mitigation efforts have aimed to create multiplier impacts on economic activities. For example, investment that enters Indonesia is expected to increase production, provide jobs and boost exports. Not all the multiplier effects can be achieved.

Also read: Indonesian Economy After Vaccination

The Covid-19 pandemic has instead rapidly brought multiple negative effects. The negative impacts that have already hit the country include, among others, an economic recession and increase in the unemployment rate.

Indonesia has recorded a continued increase in new Covid-19 cases. The increase in new cases has continued since the first cases were announced in Indonesia on 2 March, 2020.

KOMPAS/RADITYA HELABUMI

Prospective train passengers line up to carry out a rapid test at Pasar Senen Station, Central Jakarta, Thursday (17/12/2020). The DKI Jakarta Provincial Government will tighten a number of sectors during the transitional large-scale social restriction (PSBB) period to anticipate a spike in Covid-19 cases ahead of the 2021 Christmas and New Year holidays.

Indonesia was still undecided on whether to focus its mitigation efforts related to health or the economy even until the pandemic entered its nine months in the country. The government preferred the middle way, although it insisted that it sided with health issues.

Finally, the government chose to use the “accelerate and break” method to strike a balance in coping with the impact of the pandemic on the economy and health. However, such a measure was considered half-hearted in resolving the impact of the pandemic, both on health and the economy. Many people have become fatigued in facing the pandemic

Also read: 2021 Challenge: Adapting and Collaborating or Defeated by the Pandemic

The government has allocated Rp 695.2 trillion (US$47.94 billion) to finance mitigation efforts to cope with Covid-19 and to restore the national economy. In order to maintain economic stability and people’s purchasing power, the government has introduced a loan restructuring program to help companies affected by the pandemic as well as to provide a salary subsidy for workers with net salaries below Rp 5 million per month, and assistance for micro, small and medium enterprises (MSMEs). The government is also encouraging the people to shop and invest.

In fact, public confidence has not yet recovered. The economy is still clouded with uncertainty. This can be seen from the public spending which remains weak.

In fact, people still prefer to saving their money in case of a prolonged pandemic. Meanwhile, the benchmark interest rate for Bank Indonesia (BI) continued to fall and reached as low as 3.75 percent as of November 2020. The Deposit Insurance Corporation (LPS) has also lowered the guaranteed interest rate to 4.5 percent for rupiah deposits at commercial banks. It means that the returns from savings in banks have fallen.

Also read: Beware of the Second Wave of Recession

However, according to BI data as of October 2020, third party funds grew 11.6 percent on an annual basis, while credit disbursement fell by 0.9 percent on an annual basis.

In fact, the increase in the loan disbursement significantly affects the economic growth. The increase in the savings also indicated the decline in the people’s spending, which is also reflected the country’s low inflation rate.

Projection

SUMBER: BANK DUNIA

Projected economic growth in Indonesia. Source: World Bank

During this year, the economic growth target has been changed several times. However, a number of important economic indicators remain unchanged such as the trends of the public spending as the main driver of the gross domestic product (GDP), and those related to imports of raw and auxiliary materials as well as the government expenditures. Towards the end of this year, there are still hundreds of trillions of rupiah in local government funds that have not been disbursed.

In fact, for some people, a pandemic has become a momentum for changes. Many companies, for example, have changed their conventional services into digital platforms and have also provided anticipatory plans in cases the business targets could not be achieved.

Some say that a pandemic has also become a moment to reset policies to be more anticipatory and then start new steps. The government, for example, embodies this step through the Law Number 11 of 2020 concerning Job Creation, which is expected to be able to accelerate the economic recovery.

Also read: Digital Economy

By 2021, the economy is expected to recover. The government has set economic growth at 5 percent in the 2021 State Budget, while BI estimates the economy will grow by 4.8-5.8 percent during the year. This optimism is also triggered by the availability of the vaccine.vaccine

To be sure, the measures to be taken in 2021 should not be just doing business as usual, because the ongoing pandemic cannot be dealt with the usual way.