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National Economic Recovery Stimulates Growth

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By: Aulia Hawa, Observer of Development Economics

The government rolled out the National Economic Recovery (PEN) program during the Covid-19 pandemic, both in the form of incentives to entrepreneurs and social assistance to the community. The existence of PEN needs to be widely appreciated because it is proven to be able to stimulate economic growth.

In 2021, the Indonesian economy managed to recover and grow 3.69% in the midst of the second wave due to the Delta variant. The acceleration of economic recovery in 2022 was mainly driven by a more controlled pandemic and a much higher vaccination coverage, thus boosting public confidence and recovering economic activity.

Real sector indicators show good prospects in early 2022, where the consumer confidence index is at an optimistic level of 113.10 in February 2022. Meanwhile, growth in imports of raw materials was recorded at 29.98% (yoy) and capital goods at 20.98%. (yoy) in February 2022, as well as the manufacturing Purchasing Managers’ Index (PMI) at an expansionary level of 51.2 as of February 2022.

In addition to vaccination and pandemic control discipline, the acceleration of economic recovery in 2022 will also be determined by appropriate economic policy responses through accommodative, measurable and effective fiscal and monetary policies, implementation of the Job Creation Law and taxation law, efforts to maintain price stability, especially food and beverages. energy, and significant job creation and readiness to digitally transform and innovate for the future.

The 2022 National Economic Recovery Program (PEN) which is currently allocated Rp. 455.62 T, is directed to encourage recovery in various sectors while still prioritizing the balance between health and the economy. In addition, the 2022 PEN is designed to be flexible and responsive to the dynamics that occur and is simplified into three clusters, namely the health cluster, the social protection cluster and the economic recovery strengthening cluster.

Coordinating Minister for Economic Affairs Airlangga Hartarto said, in order to accelerate recovery since early 2022, the government has implemented a front loading policy through PEN programs, including the extension of the 3% KUR interest subsidy, the extension of the Government-borne Sales Tax on Luxury Goods (PPnBM DTP) incentives for certain types of automotive, extension of VAT incentives for DTP Housing, expansion of cash assistance for street vendors, stalls and fishermen (BT-PKLWN) in 212 priority districts/cities to eradicate extreme poverty, as well as accelerate the distribution of various social services, such as PKH, basic food cards and pre-employment cards.

In 2022, Indonesia is also trusted to hold the G20 Presidency, an international economic cooperation forum consisting of 19 countries and the European Union. There are 3 things that are the main focus of Indonesia, namely inclusive health care, digital-based economic transformation and the transition to sustainable energy.

There are 483 activities during the 2022 G20 Indonesia Presidency spread across 25 cities throughout Indonesia. The implementation of the various activities of the G20 Presidency is expected to increase domestic consumption to Rp 1.7 trillion, increase national GDP to Rp 7.4 trillion, as well as involve MSMEs and employment of around 33 thousand in various sectors.

With the spirit to “Recover Together”, the G20 Presidency of Indonesia 2022 is expected to contribute in supporting national and global economic recovery. This is necessary to take advantage of the momentum of the G20 Presidency and encourage the role of higher education institutions, especially academics and students, for sustainable, inclusive and environmentally sound collaboration through working groups within the G20, namely Youth20 and Think20.

Meanwhile, of the five PEN clusters, business protection posts have the highest impact on economic growth, which is 0.25 percent. The health cluster has the second highest impact on economic growth, which is 0.17 percent. Meanwhile, the cluster household consumption gave an additional 0.21 percent growth.

The government also encourages various policies to be able to reduce extreme poverty levels in regions in Indonesia throughout 2022. One of them is through social protection programs that are included in the PEN program. The poverty rate in Indonesia in 2021 is 10.14 percent and 9.71 percent in September as the government continues to accelerate the realization of social protection programs of Rp. 171 trillion or 91.5 percent of the ceiling of Rp. 186.64 trillion, which is given, among other things, to alleviate extreme poverty. to 1.16 million recipients in 35 Priority Regencies or Cities.

Meanwhile, the community protection program in 2022 has a ceiling of IDR 154.8 trillion to continue social assistance programs such as PKH and basic necessities, pre-employment cards, BLT Desa, Job Loss Insurance, as well as anticipation of the expansion of social protection.

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