The pandemic in Indonesia – from the end of 2019 to 2021 has caused serious impacts such as unemployment and poverty, a widening gap between rich and poor, declining GDP, slowing trade both at home and abroad. Other informal workers who are not covered by social security, women who are either housewives or both work and take care of families, people with disabilities, children and migrants – these groups have suffered disproportionately from crises. But so do children who miss a good part of the school year, at least in terms of hands-on education, and will suffer the consequences for the rest of their lives. This development adds to the already existing challenges of providing relevant and adequate skills to a population that remains young but will soon reach the peak of demographic dividends. But various studies conducted by several institutions including the World Bank and the OECD (Organization for Economic Co-operation and Development) mentioned an encouraging prediction in 2022.
The UECD in its prediction mentioned that Indonesia’s recovery has been delayed by new restrictions and uncertainties as the Delta variant of COVID-19 spreads rapidly. Growth in 2021 is projected to be relatively modest at 3.3%, but will rebound in 2022 and 2023 to above 5% as the normalized health situation allows consumer demand and investor confidence to return. Inflation expectations remain well anchored and higher global price pass-through into consumer prices are expected to be limited. Delays in securing vaccines and vaccinating eligible populations would risk further health crises, slowing recovery and putting policies under pressure.
Despite the recession, the first in 20 years, Indonesia avoided a bigger downturn in 2020 thanks to a credible economic policy response. The latest OECD Economic Survey in Indonesia acknowledged that the amount of support was limited by low tax revenues and underlined that the disbursement of the package proved initially difficult and slow. But it was accompanied by economic reforms, suggesting that meaningful efforts to improve market functioning could be made even in the midst of a severe crisis. The economy is recovering.
GDP shrank by 2.1% in 2020 and the Survey saw growth of 4.9% for 2021 and 5.4% in 2022. The rebound is underlay supported by pent-up demand for consumer goods and capital goods and will gain momentum as containment measures are phased out and vaccinations take place across the archipelago of 17,000 islands. The economic outlook is surrounded by substantial risks and uncertainties Most Indonesians work in the informal sector.
Budget flexibility, recovering tax revenues and conducive financing conditions allowed authorities to quickly respond to Delta’s surge. The government increased the fiscal package of COVID 2021 by 0.3 percent to 4.8 percent of GDP in 2020 and focused on health and social assistance response. Proposed: Tax collection has started to rebound but the tax-to-GDP ratio is still 2.7 percent below pre-pandemic in September 2021 due to weak labor and corporate income. Bank Indonesia, commercial banks and increased ownership of other domestic investors over the government’s local currency debt have helped meet higher government financing needs.
The World Bank said that overall, the public health response was strong and helped level Delta cases relatively early compared to regional counterparts. But the morbidity of COVID was relatively high during Delta’s peak as many hospitals reached full capacity and oxygen needs increased sharply. Indonesia has accelerated its vaccine launch program, especially among vulnerable groups and in areas with high transmission of the virus such as cities and economic centers. The economy is projected to rebound by 3.7 percent in 2021. It is expected to rise to 5.2 percent by 2022 if Indonesia does not face a severe COVID-19 wave, most provinces reach 70 percent vaccine coverage by 2022 and monetary and fiscal policy remains accommodative. However, risks and uncertainties remain very high, including the possibility that a new, contagious and severe variant of COVID-19 could spread.
In this global pandemic situation there is actually optimism in Indonesia some good opportunities in 2022 and beyond, namely good prospects in the halal food industry, Halal tourism; and Islamic finance (Syariah Finance and Banking) given the large Muslim population. In the field of Halal Food Indonesia must be willing to learn from Thailand which is not a Muslim-majority country, but this country all-out promotes the Halal Food industry throughout the world, especially to Islamic countries. In addition, the development of the Digital Economy will be a mainstay in 2022; This can be seen from the development of several well-known start-up businesses in Indonesia. It’s just that Indonesia still needs to be vigilant, because the optimistic predictions from the OECD and the World Bank assume that this coronavirus pandemic will subside in 2022; considering the new variant of corona – Omicron in various developed countries both the United States and Europe and Australia for the time being is still a dangerous scourge. No less important is that the political conditions in Indonesia must be maintained stable.
