The year 2020 has been turbulent, with no precedent in dealing with the COVID-19 pandemic. Our ability to end this health crisis will determine the speed of economic recovery.
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EDITOR
·3 minutes read
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.
The year 2020 has been turbulent, with no precedent in dealing with the COVID-19 pandemic. Our ability to end this health crisis will determine the speed of economic recovery.
This point is the reason why Indonesia’s 2021 economic recovery should be regarded with cautious optimism. The national economic recovery, which started in the second half of 2020, is highly likely to continue into 2021, but the scale, speed, and degree of inclusivity of the recovery will be deter-mined by how well we can manage the COVID-19 pandemic. If we take longer to control the pandemic, the economy will remain in statis for a longer time. This is the main challenge faced in recovering the economy. The success of the mass vaccination program will be key to solve this issue.
The government’s statement on free vaccination for everyone is good news. Our confidence over the government statement has been strengthened by Bank Indonesia’s commitment to support the funding of the mass vaccination program through the burden sharing mechanism – buying government bonds to lighten the burden of fiscal policy.
So far, the availability of the vaccines is still un-certain.
The problem we face now is the availability of COVID-19 vaccines, the timeline and the speed of the mass vaccination program considering the size of our population and the archipelago, as well as resistance from some people against mass vaccination. So far, the availability of the vaccines is still un-certain.
Besides the cooperation with China’s Sinovac and the effort of state-owned pharmaceutical com-pany Bio Farma to develop the capability to produce COVID-19 vaccines domestically, the government has not made any announcement regarding cooperation with other vaccine makers – though this effort is critical to ensure the availability of vaccines for our huge population.
AP PHOTO/DITA ALANGKARA
A drink vendor rides his bicycle reflected in a puddle in the main business district in Jakarta, Indonesia, Thursday, Nov. 5, 2020. Indonesia\'s economy entered its first recession since the Asian financial crisis more than two decades ago as the country struggles to curb the coronavirus pandemic under control.
Furthermore, we have not considered the efficacy and effectiveness of the vaccine. Uncertainty over these factors is the main reason why the World Bank views the Indonesian economic recovery as full of challenges. Public health policy is the key behind Indonesia’s economic recovery. The implementation of health protocol is equally important.
The government and other institutions are more optimistic compared with the World Bank, which usually has a more conservative outlook. While the Bank predicts a 4.4 percent growth for Indonesia in 2021, following 2.2 percent contraction in 2020, the government is confident that Indonesia could book economic growth within the range of 4.5 to 5.5 percent in 2021. The National Development Planning Agency (Bappenas) predicts next year’s economic growth to be 5 percent.
Various economic indicators like the Rupiah exchange rate, trade balance, and foreign capital flow are showing positive signs, despite external uncertainty, such as uneven global economic recovery, unstable geopolitics, trade war, and post-COVID economic rebalancing.
BI projects the 2021 economy to grow between 4.8 and 5.8 percent. The International Monetary Fund (IMF) is even more optimistic, setting Indonesia’s growth rate next year at 6.1 percent, above the pre-pandemic growth rate. Various economic indicators like the Rupiah exchange rate, trade balance, and foreign capital flow are showing positive signs, despite external uncertainty, such as uneven global economic recovery, unstable geopolitics, trade war, and post-COVID economic rebalancing.
We know the major challenges and the difficulty of managing the challenges. Policy complexity and implementation, ensuring the continuity of the national economic recovery, as well as maintain the absorption will be challenging. The government needs to work hard, and all parties should provide the necessary support in order to ensure faster economic recovery.
