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Maintain Optimism to Avoid the Recession Impact from Covid-19

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By: Diana Aprilianti) *

International Monetary Fund (International Monetary Found) and World Bank (World Bank) predict the global financial crisis in 2020 will be far more severe than in 2008. However, Indonesia is believed to still have hope to avoid the recession.

Recession is a reflection of a shrinking economy. When the economic “pie” is shrinking, it means that employment is reduced. There are fewer jobs and this will certainly increase poverty rates.

Indonesian President Joko Widodo often stated that the current global economic condition was not easy. Almost all economic growth in all countries, no one is able to record positive growth.

Jokowi once said, imagine the contents are only minus in the big position in the third quarter projections. We Indonesia in the first quarter is still plus, before plus 5 percent, in the second quarter we will fall minus 4.3, maybe 5 percent.

What the former Mayor of Surakarta said did not clearly mention that Indonesia would enter the abyss of recession, along with the economic growth of neighboring countries which had already entered the ‘black hole’.

Head of the Ministry of Finance’s Fiscal Agency (BKF), Febrio Kacaribu said that based on the latest release from the World Bank, more than 90% of the world economy in 2020 will experience a crisis, in other words economic growth will be negative.

In a webinar, Febrio said that although Indonesia was very depressed by various challenges, the conditions seemed more resilient when compared to other countries. At present we still have a chance not to enter a recession. Even if the recession, the expectations may not be too deep.

Febrio said that currently the government hopes that the Indonesian economy this year will be in the range of 0% and maybe a little below 0%. According to him, many countries, especially developed countries and not a few developing countries since the first and second quarters of 2020 predicted by the World Bank will experience pressure.

He said, for developed countries the recession was very deep, some even reached -12% and -15%. While Indonesia is predicted to be at 0%. Febrio said that Indonesia was trying not to be negative, if it was successful then it was a joint achievement.

To avoid recession in 2020, is a very important step if Indonesia wants to rise in 2021. The reason is that Indonesia is able to increase investment in 2021 by earning the title of a country that is able to recover quickly from the crisis.

Febrio said, in 2021 we must grow above 4%, if possible even more than that. Therefore, this will provide an advantage for Indonesia to increase investment in 2021 relatively quickly compared to other countries.

In fact, this has led to capital inflow, similar to 2010, 2011, 2012 where many countries experienced a deep crisis and several countries had relatively better growth so that capital entered into these countries including Indonesia at that time. At that time Indonesia grew around 6%.

However, Febrio admitted that in the second quarter of 2020, according to the Ministry of Finance’s assessment, Indonesia would experience negative economic growth. At present the estimate from the Ministry of Finance, Indonesia will grow negatively in the second quarter of 2020 at -4.3%. To deal with these impacts, the stimulus is said to indeed continue.

This is what is being pushed so that the Indonesian economy can grow even more solidly for the third quarter. This has become a real determining point for us because the second quarter has certainly been negative. If we can do that, the momentum can continue until the fourth quarter and we hope to grow above 2-3%.

However, Febrio also said that it does require strong discipline from all of us, do not let the economic recovery that has begun to improve the second wave, which really should be avoided.

Optimism about the resilience of the nation’s economy must certainly be maintained, especially with the implementation of new normal, it is hoped that the microeconomic sector will continue to move and absorb new workers.

) * Active writer in the Indonesian Institute for Strategic Information and Studies (LSISI)

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