The resurgence of a pandemic almost always begins with an increase in mobility, which does not only occur in the formal sector. Activities that are related to aspects of celebrations often become the trigger.
By
ARI KUNCORO
·6 minutes read
KOMPAS/HERU SRI KUMORO
Ari Kuncoro
The sharp increase in new Covid-19 cases after Idul Fitri is a repetition of the pattern that occurred due to extended vacations in the fourth quarter of 2020. A similar phenomenon has also taken place in other countries. In fact, several countries that were previously said to have succeeded in controlling the pandemic, such as Taiwan, Vietnam, Japan, and South Korea, are struggling to cope with the resurgence of Covid-19 cases.
The resurgence of a pandemic almost always begins with an increase in mobility, which does not only occur in the formal sector. Activities that are related to aspects of celebrations or festivals that are usually informal and kinship in nature, often become the trigger. However, their impact directly affects the formal sector due to inter-sectorial mobility. India, for example, before the resurgence of the pandemic in the first quarter of 2021, recorded an annual growth of 1.6 percent. However, due to the resurgence, India\'s growth in the second quarter contracted 1.5 percent, according to the Nomura Institute\'s forecast.
The resurgence of the pandemic in Indonesia occurred when the economy began to show a recovery momentum thanks to a series of positive expectations that were intertwined between the demand side and the production side. For the second month in a row, the Consumer Confidence Index (IKK) published by Bank Indonesia is in the optimistic zone (above 100). In April and May 2021, the scores reached 101.5 and 104.4, respectively. It showed an improvement as In March, the index was still in the pessimistic zone at 93.4.
The improvement in the IKK index was mainly driven by the Consumer Expectation Index, which reflected an optimism outlook for the future. The durable goods purchase index increased from 84.6 in April to 87.8 in May. Based on the consumption expenditure to income, the index rose from 75.5 to 75.8.
Savings fell slightly from 14.8 to 14.6 percent. This showed the people had begun to shop. Purchasing power also doesn\'t seem to be a problem because all expectations for the future are quite optimistic. It also showed that expectation index for the next six months, such as the income expectation index, job availability, and respective business activities, was also in the optimistic zone (above 100).
On the production side, the Purchasing Managers’ Index (PMI) published by IHS Markit also showed an expansion. The PMI figure rose to new record of 55.3 in May 2021. The PMI rose for three consecutive months after it recorded a score of above 50 in November 2020, showing a sign of production expansion.
One of the factors that helped increase the PMI was the increase in Indonesia\'s exports, including industrial goods which recorded an annual growth of 58.6 percent in May.
Meanwhile, imports grew 68.6 percent on an annual basis, dominated by imports of raw materials which rose 68.68 percent.
KOMPAS/AGUS SUSANTO
Aerial photo of import-export activities at the Jakarta International Container Terminal (JICT), North Jakarta, Wednesday (16/6/2021).
Learning from experience
On June 17, 2021, new confirmed cases of Covid-19 were recorded at 12,624 with an average of 7,191 cases per day during the past seven days. Learning from the experience of last January, when the number of the daily cases exceeded 14,000, there was a sharp decline in the IKK index, which dropped from 96.5 in December 2020 to 84.9 in January 2021. In the following month or in February, the index stagnated at 85.8. The index rose to 93.4 in March following the implementation of the public activity restrictions (PPKM) in February that reduced the number of new daily cases.
There seems to be a shift in the structure of expectations, if in a short time, there is a spike in daily cases.
This can lead to more conservative spending patterns. The impact of the spike in new cases in January 2021 can be seen from the annual growth in public consumption in the first quarter of 2021 which still showed a contraction of 2.23 percent. It improved compared to the previous quarter, but it was only able to narrow the economic contraction to 0.74 percent, not yet in the positive zone.
The production side in the PMI also experienced a decline. Unlike the IKK, the PMI did not pass the contraction zone. In part, this was helped by Indonesia\'s rapid increase in export-import activities in May 2021, with the world supply chain starting to expand, particularly in China and the United States. The PMI hit 50.9 in February, down from 52.2 in the previous month. However, it showed an upward trend in the following month and reached a record high in May.
Positive expectations are intertwined with each other. To maintain long-term recovery prospects, the government needs to prevent a reversal of expectations. Learning from the experience of January-February 2021, controlling the current resurgence should become the government’s priority so that the number of new daily cases can be reduced to below 10,000 .
As with all the other policies, credibility will be determined by the timing of implementation and the effect of notification (Krebs and Wilson, 1982). The notification effect, which is often called as the headline effect or media effect, is difficult to predict (Chen, 2020).
The effect tends to be negative if the policy change is too drastic or completely new. On the other hand, negative effects can also occur if the aspects of policy coordination and implementation are nonexistent (Backus and Driffill, 1985). A strict social restriction measure (PSBB) was implemented in a province in 2020 but it was introduced without coordination with the central government. As a result, public expectations moved towards the negative trend.
It was only after its implementation in the field was clarified through public communication, did the expectations turn to the positive which helped the economic recovery. Based on this, the government introduced a community-based social restrictions (micro PPKM) to cope with the resurgence occurred in January 2021.
The resurgence of the pandemic occurred very quickly, so that an effort to minimize head line effects and implementation policy delays should be carried out through the tightening of the community-based restrictions by involving the Home Affairs Ministry, the military and police down to micro level such as through heads of neighborhood units (RT) and community units (RW) and even households. The decline in community discipline also occurs because of the boredom factor. To make the public aware, an innovative and direct approach is needed.
Some have started to be carried out at the national and regional levels, such as limiting the mobility of the people, working from home (WFH) for nearly 100 percent of workers in non-essential business units, monitoring from community leaders, the control on the use of health protocols by the local government, vaccinations in production centers/factories/markets/offices. The public must be also involved at the ultra-micro level to improve the credibility of the policy. However, whatever policy we choose, substance is more important, especially coordination and implementation in the field.
ARI KUNCORO, Rector of the University of Indonesia
This article was translated by Hendarsyah Tarmizi.
