Stimulus to Lift the Economy

KOMPAS/TOTOK WIJAYANTO

President Joko “Jokowi” Widodo delivers his speech virtually during the commemoration of 2021 National Press Day in Ancol, North Jakarta, on Tuesday (9/2/2021. In his address at the event themed “Rising from the Pandemic, Jakarta as the Gateway to Economic Recovery with the Press as the Accelerator of Change”, the President expressed appreciation for all members of the press who had helped the government in educating the public to be disciplined in adhering to health protocols to prevent the spread of the novel coronavirus.

The COVID-19 pandemic has not shown any signs of abating, raising concerns over the prospect of national economic recovery in 2021.

We entered 2021 with high optimism due to moderate recession in 2020 compared to other coun-tries. Within days, however, our optimism faded away, replaced by anxiety.

Also read: Growth Prospect for 2021

Various international institutions, including the International Monetary Fund (IMF), have revised down their economic projection for Indonesia in 2021, predicting the country’s economic growth to be below the global average. Some of them predict the Indonesian economy will experience another contraction in the first quarter of 2021. This condition showed, indirectly, our losses in the fight against the pandemic and its impact on our economy.

The United States, which records the highest number of COVID-19 cases globally, is also predicted to experience a surge in economic growth.

The situation in Indonesia is the opposite of other developing economies like China and India, which have been predicted to experience double digit economic growth in 2021, after experiencing deep contraction or low growth in 2020. The United States, which records the highest number of COVID-19 cases globally, is also predicted to experience a surge in economic growth.

Also read: Vaccines and Economic Recovery

At the same time, we are facing the threat of new coronavirus mutation, which is more infectious, and the potential of global monetary tightening, particularly in the US, which threatens the prospect of global economic recovery. To solve this situation, economists have emphasized the need for faster economic recovery by not losing the current momentum – better if the recovery occurred be-fore tapering in the US.

KOMPAS/TOTOK WIJAYANTO

A worker carries trays of freshly made tofu to the packaging section of a small tofu producer on Thursday (23/7/2020) in Pancoran, South Jakarta. As of July 21, the government has disbursed Rp 11.84 trillion in working capital for cooperatives and micro, small and medium enterprises (MSMEs) through national economic recovery program. The figure is 9.59 percent of the Rp 123.46 trillion fund for cooperatives and MSMEs.

An important message emerges from this situation: to not be complacent and draw the stimulus too early. Boosting the stimulus to lift the economy is the key – aside from accelerating vaccination and implementing stricter health protocols. Our capability to speed up the vaccination process will deter-mine economic recovery. However, we face bottlenecks in vaccine supply, as well as our medical personnel capability to vaccinate 70 percent of the population.

Losing the fight will result in economic disaster for all of us.

Regarding economic stimulus, President Joko “Jokowi” Widodo is facing a dilemmatic situation. On the one hand, he is tied by a commitment to return budget deficit below 3 percent of gross domestic product (GDP) and has only a few years in his second term to meet this commitment, making fiscal expansion through the adoption of a larger budget deficit even harder. But in this extraordinary situ-ation we have no other option aside from winning the fight against the pandemic as well as its im-pacts. Losing the fight will result in economic disaster for all of us.

Also read: 2021: Between Pandemic and Economic Recovery

The proven National Economic Recovery (PEN) stimulus must be continued to lift the economy in 2021, disbursed faster and spread across more sectors. Budget reallocation must be focused toward sectors that provide the largest impacts on the domestic economy because the Indonesian economy is highly dependent on domestic demand, particularly household spending.

SEKRETARIAT PRESIDEN

President Joko Widodo held a meeting with ministers and Coordination Task Force for Covid-19, Doni Monardo at the Merdeka Palace, Jakarta, Monday (20/7/2020). The meeting discussed the formation of the Covid-19 Handling Committee and the National Economic Recovery.

In addition, stimulus for businesses, particularly for micro, small and medium enterprises (MSMEs), which have a large labor absorption rate, must be increased. The scale, implementation, and effec-tiveness of economic stimulus through the 2021 PEN programs is the key to boosting confidence as well as accelerating the progress of national economic recovery.

(This article was translated by Lionel Priyadi)