IO – The COVID-19 pandemic continues to haunt the world and especially our nation. The number of people that are exposed to the virus continues to increase. The COVID-19 pandemic hit the foundations of the nation’s economy, on both a macroeconomic and microeconomic level. Many companies are threatened with the continuity of production so that many workers are being suspended or laid off. The economic downturn is global, regional and national.
The impact of COVID-19 was immediately displayed by the low rate of economic growth in the first quarter of 2020, amounting to just 2.97%. Economic growth in the first quarter of 2020 was much smaller when compared to that of the first quarter of 2019 which reached 5.07%. Surely this sizable decline is an early sign of Indonesia’s failure to maintain economic growth at 5%. The economic growth rate of 2.97% will continue to be threatened in the following quarters, considering that COVID-19 has not yet shown any signs of coming to an end, be it abroad or in Indonesia.
With household consumption only growing by 2.84% in the first quarter of 2020, it’s evident that people’s purchasing power has declined dramatically. Layoffs continue to occur and workers are being suspended without wages; more and more workers are suffering wage cuts. These factors are among the primary reasons behind the decline in public consumption. Investment growth in the first quarter of 2020 was only able to grow 1.70%, which is evidence of investment sluggishness, a phenomenon that has severely crimped employment opportunities.
Government consumption (expenditure) recorded growth of 3.74% in the first quarter of 2020, far lower than the growth in the first quarter of 2019, which reached 5.22%. Growth in government consumption in the first quarter of this year was supported by increased spending on social rehabilitation, social security, and assistance for poverty reduction amid the COVID-19 pandemic. Exports grew by 0.24 percent in the first quarter of 2020, with imports contracting by -2.19 percent.
This decline in economic growth has certainly been predicted by the Government, and therefore to curb it, authorities have poured out economic stimulus and social assistance including financing for Covid 19 handling, with a total budget of IDR. 405.1 Trillion. The total budget consists of, namely, First, Covid 19 – Health Countermeasure Interventions in the amount of IDR. 75 trillion: a. Subsidies for the adjustment of tariffs for non-wage earners (PBPU) and non-workers according to the Presidential Regulations No. 75 of 2020 amounting to IDR. 3 trillion; b. Central and regional medical personnel incentives budgeted in the amount of IDR. 5.9 trillion, consisting of Central Medical Personnel budgeted in the amount of IDR 1.3 Trillion, and Regional Medical Personnel budgeted in the amount of IDR. 4.6 Trillion; c. Death Benefits for health workers IDR. 300 billion; d. Health Management Expenditures for Covid 19 amounting to IDR. 65.8 trillion for PPE, Rapid tests and Reagents; health facilities and infrastructure; and HR support.
Second, the Social Safety Net will be expanded with an allocation of IDR. 110 trillion. Third, Industry support, budgeted in the amount of IDR. 70.1 Trillion, namely for taxes and import duties borne by the gov
ernment, and stimulation of People Business Credit (KUR). And fourth, support for Budget Financing for the handling of the Covid 19 pandemic, amounting to IDR. 150 trillion.
With a declining economic growth rate in the first quarter of 2020, this will certainly have a significant impact on increasing the level of open unemployment (TPT). Based on data from Statistics Indonesia (BPS) in 2019, the total workforce in February 2019 numbered 136.18 million, with TPT of 5.01 percent or 6.83 million people. The government initially had a target of reducing TPT to 4.8 percent in 2020 or around 6.5 million from the workforce. I think the TPT reduction target can be achieved under normal circumstances. With a focus on improving human resources, one of which is the support of the pre-employment card program, and the government’s efforts to continue infrastructure development and other investment efforts, the target can be achieved.
But with the existence of the COVID-19 pandemic, I seriously consider the TPT target to be difficult to achieve. The layoffs that continue to occur and the increasing number of workers suspended without pay, as well as informal workers who find it difficult to work due to the Large-Scale Social Restrictions (PSBB) which results in a declining number of consumers, the TPT number could be greater than 5%. This is also supported by the growth of a new workforce of around 2.2 million people each year (formal school graduates including tertiary institutions) who will indeed find it difficult to find work in highly-affected industrial conditions. In such a situation, I consider TPT to look to increase, above 5%, even reaching 5.5%.
The only way to control TPT is to support industrial growth so that the industry can operate again and recruit workers. Industrial stimulus must be implemented immediately. Fiscal incentives (tax breaks) must continue, and soft loans for working capital must be realized immediately so that the wheels of production will keep on turning. In addition, cash-intensive programs in the regions must be implemented in order to recruit workers. Infrastructure projects will continue so that there will be recruitment of workers. And this all is just from the supply side.
Of course the factor that must be improved and improved is not only just from the supply side but also from the demand side, where we must ensure that demand must be maintained even amid the pandemic. Social assistance must be continued during this pandemic, so that people’s purchasing power is maintained, even though it cannot maintain the level of purchasing power under normal conditions.
The success of TPT control depends primarily on the Government’s strategy and efforts to ensure control and elimination of COVID-19 as quickly and thoroughly as possible, and by then Indonesia will enter a recovery phase from Covid-19. Then all what’s left is how the government is to ensure industry can push forward and stimulate the people’s purchasing power – including government efforts to continue to open foreign markets, because those were badly impacted by the COVID-19 pandemic.
Hopefully the COVID-19 pandemic will soon be over and life will return to normal. The health of our nation has to recover and the economy pick up speed, so that the TPT number can be shrunk, and the welfare of all the people will continue to rise.