IO – The COVID-19 virus, which shows no signs of abating in the near future, has brought the world into what is being called unchartered territory. Much is unknown, but governments around the globe are preparing for the worst. Some health experts are guessing COVID-19 could infect between 20-70 percent of the population in infected countries. If so, this means hundreds of millions will contract the disease. And if the death rate ends up being 1 percent, as some expect, the final toll would be in the millions.
Preparing the public health sector to face the challenge of providing medical care for the sick will be a daunting task, even in developed countries. If Sanjay Gupta, a medical expert who often provides commentary for CNN, is right, hundreds of thousands of Americans alone will need intensive medical care. Ensuring sufficient medical staff, beds, medications, medical gear, food and water as the virus continues to spread is going to stretch the resources of most countries, even in places llke the United States.
Governments must also consider and act quickly to mitigate the potential economic impact, which could be as much as a 2 percent decline in the global economy. This is based on predictions that COVID-19 could be infecting people not only this flu season but beyond next year. With supply chains and transportation being disrupted, companies coming under financial stress and workers staying at home or falling sick, the economic shocks will be far-reaching and wide.
How well governments will cope with these challenges comes down to not only the capacity to prepare but leadership, as well. US President Donald Trump is trying to downplay the risks, which is frightening the medical community because if you don’t acknowledge the problemthen the government is not prepared to address it. Italy, which has been the hardest hit with COVID-19 out of all of Europe, has prepared a multi-billion dollar stimulus package in anticipation of a worsening downturn in the global economy. And in Asia, the epicenter of the outbreak, governments are scrambling to mitigate the health-related and economic risks down the road.
The Indonesian government, which has just started to wake up to the reality that indeed we are entering a very dangerous and unchartered territory, is far behind its regional peers in preparations.
Previously, with only one testing center being made available for the entire country, the government has responded to its critics by opening more testing facilities. As a means of comparison, while South Korea has so far conducted more than 80,000 tests, Indonesia has only done a little over 150. Scaling up so late into the crisis has only exacerbated the risk of the virus spreading into a wider geographic area as infected people move around, travel, and infect others.
The economics cabinet has also started to move, first by easing monetary policy and then announcing a USD742 million stimulus package. Besides market interventions and a suspension in short selling in a bid to stabilize the sliding rupiah, foreign reserve requirements were relaxed, a measure that will pump an estimated USD3.2 billion into the banking system.
The fiscal stimulus package, which includes a 30 percent increase in subsidies for the poor to cover their basic needs, increases in a state property financing program, and a wide gamut of policies intended to boost tourism, is probably short of the mark for what is needed.
In Malaysia, a USD4 billion stimulus package has been announced, and in Thailand a USD3 billion package will be unveiled next week. This shows the real sense of urgency in Kuala Lumpur and Bangkok. Why the Jokowi administration seems to think less of a stimulus is needed is unclear. It could prove to be a big mistake.
Some of the stimulus funds earmarked to boost tourism is also an error. Tourism-related sectors will need help as revenues plummet, but any attempts to boost arrivals is a waste of money. People will simply avoid travelling until COVID-19 is contained.
Indonesia would be better off by looking at Thailand’s policies. Rather than trying to boost tourism, they will be providing income opportunitues for people working in tourism- related companies. Subsidies to boost consumption are not limited to the poor, but all Thais. Policymakers there properly understand Keynesian economics, and that now is the time to prime the pump to the fullest extent possible.