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Economic stimulus, social safety get priority as slowdown looms

Economic stimulus, social safety get priority as slowdown looms

A passenger's temperature body is checked before being allowed to enter the check-in counter of the Soekarno Hatta International Airport. (ANTARA FOTO/Muhammad Iqbal/nz (ANTARA FOTO/MUHAMMAD IQBAL)

The novel coronavirus (COVID-19) outbreak, declared by the WHO as a pandemic, has wreaked havoc on the global economy by disrupting supply chains, halting tourism, and triggering layoffs in several countries, including Indonesia.

Many self-employed Indonesians working in the informal sector, such as street vendors and motorcycle taxi drivers, have had to suspend their businesses on account of the virus forcing customers to stay at home.

In addition, hundreds of thousands of workers may face layoffs due to the disruption of production chains. "We are calling this a layoff emergency situation," Said Iqbal, president of the Indonesia Labor Union Confederation (KSPI) said.

On March 20, President Joko Widodo (Jokowi) assured the Indonesian people that the government is ready to face the economic slowdown owing to the COVID-19 crisis.

The Indonesian government has claimed that it had put precautionary measures in place since the early stages of the coronavirus outbreak. The government's response has focused on three aspects -- safety and health; social safety net; and, economic impact.

Jokowi, who is working out of the Bogor Palace and communicating with his ministers via teleconferencing, has echoed the government’s decision to offer a social safety net and economic stimulus to MSMEs affected by the COVID-19 pandemic to help them stay afloat in the current challenging scenario.

The government will prepare an economic stimulus for MSMEs and informal businesses without delay, Jokowi remarked while chairing a limited cabinet meeting via videoconferencing in West Java, on March 30.

"For MSMEs, self-employed people, and informal workers, we have already discussed that the government will immediately prepare social safety net programs and economic stimulus," the president noted.

The President has directed ministries and institutions to implement the social safety net program in a bid to mitigate the economic impact of the COVID-19 pandemic.

Several informal workers engaged in micro and small scale businesses, whose incomes have plummeted or who have lost their jobs due to the outbreak, have decided to leave Jakarta for their hometowns after the implementation of the emergency response period in the capital city on March 20, 2020.

Meanwhile, the Indonesian government has allocated Rp10 trillion as a precautionary measure to address the rise in the number of laid off workers and self-employed people. The program will be realized through pre-employment cards.

"The budget amounts to Rp10 trillion. Provinces should support it (the program). They should start collecting data on those who deserve it," the President noted.

The Ministry of Social Affairs had earlier highlighted that the government had increased the value of social allowance under the nine-basic necessity program card from Rp150 thousand per beneficiary family (KPM) per month to Rp200 thousand per KPM per month.

Furthermore, the ministry has expedited the distribution of aid to 10 million recipients of the Family Hope Program (PKH). The PKH assistance is disbursed every three months or four times a year, in January, April, July, and October.

"The second disbursement period, specifically for April, will be advanced to March. Likewise, the third disbursement meant for July will be advanced to April," the ministry's director general, Asep Sasa Purnama, stated on March 24, 2020.

Secretary of the Coordinating Ministry for Economic Affairs, Susiwijono, stated that the government has issued a further stimulus to boost the people's purchasing power amid the COVID-19 outbreak.

"For informal sector workers, such as stall operators, small traders, and those in markets, we are striving to coordinate their data with local governments, market associations, and so on," Susiwijono stated at a press conference in Jakarta on Thursday.

The program to offer social assistance to informal workers through pre-employment cards will be rolled out as soon as April 1.

Aldrin Herwany, the West Java coordinator of the Association of Indonesian Economists (ISEI), has praised the government's measures to mitigate the impact of the coronavirus outbreak on the country's economy.

"We support all government policies that are crucial for bringing about an improvement in Indonesia's economy, especially in West Java, the province with the largest population," Herwany noted recently.

Herwany has opined that Indonesia's economic growth will witness a significant slowdown in future.

"The coronavirus crisis will trigger an economic slowdown. The state has ordered its citizens to stay at home, even as the business world continues to lose money. Several investors have also withdrawn their capital," he stated.

He said the highest number of layoffs could potentially occur in the labor-intensive sector if the outbreak continues until the Eid al-Fitr Islamic festivities (Lebaran) this year, as employers would undoubtedly opt to reduce the number of employees to curtail expenses.

The economist and lecturer at Padjadjaran University stated that apart from the industry, the MSME sector will bear the maximum brunt of the corona outbreak since it has limited capital.

In the meantime, Indonesia’s central bank, Bank Indonesia (BI), has trimmed its economic growth forecast for 2020 to 4.2-4.6 percent from 5.0-5.4 percent earlier, citing increased global uncertainty fueled by the coronavirus, or COVID-19 outbreak.

"COVID-19 poses a challenge to efforts to boost domestic economic growth," Bank Indonesia (BI) Governor Perry Warjiyo told the press.

BI has lauded the government's fiscal stimulus measures along with the planned regional head elections (pilkada) that are projected to sustain economic growth prospects.

The BI Governor, however, has estimated that if the handling of COVID-19 is successful, then economic growth in 2021 could lie in the range of 5.2-5.6 percent.  

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