UNS — The economist from Universitas Sebelas Maret (UNS) Surakarta, Lukman Hakim, Ph.D., opens up regarding the statement of the Minister of Finance (Menkeu) the Republic of Indonesia (RI), Sri Mulyani, who states that Indonesia is officially facing a recession in the third quarter of 2020. If previously the government does not want to openly admit when Indonesia is facing a recession, Dr. Lukman Hakim considers that the sign of a recession is clear. In fact, he added, before the Covid-19 pandemic hit, Indonesia’s economy at the end of 2019 had slowed down.
“Since the end of 2019, the economic condition is not favorable. Because the balance of trade is minus already, entering the pandemic condition, the government’s prediction at the end of 2020 is minus up to 3-4 percent. In the second quarter, in August it was announced that it was -5.32 percent and this is in line with the government’s prediction that the pandemic will create a slump in economic growth,” explain Dr. Lukman Hakim to uns.ac.id, Tuesday (29/9/2020).
Dr. Lukman adds that Indonesia’s economic deficit is anticipated with the Regulation No. 1 of 2020 regarding State’s Finance Policy and Financial System Stability in Covid-19 handling. Through this regulation, the government has more flexibility due to the revised prediction from 3 percent to 5 percent. This according to Dr. Lukman renders the President unimpeachable.
When inquired on how to avoid a prolonged recession, Dr. Lukman explains that the government must boost the public consumption by intensifying the distribution of Direct Cash Assistance and assistance for workers with income under 5 million rupiah. This way people will find it easier and willing to spend their money to buy basic necessities that were reduced during the ongoing Covid-19. He further added that entering the third quarter of 2020 on the upcoming October 5th, the government must speed up and improve aid delivery schemes. The objective is aside from increasing consumption, also to reduce the negative economic impact.
“The government hopes that through previous assistance, public consumption will increase. So, it will be better if the assistance provided is aimed for consumption, then it should be used for consumption, this to avoid an excessively deep recession. For the third quarter announced on the upcoming October 5th, hopefully, the minus is not as high as the second quarter. Sri Mulyani predicted that it will only 2 percent,” Dr. Lukman said.
Handling the Covid-19 pandemic, the government is quite in dilemma between prioritizing economy rescue or public health. This according to Dr. Lukman is a normal condition because a recession due to a health crisis is a new phenomenon in this modern era. The previous recession in Indonesia happened in 2008 due to the damage in the US financial sector, and between 1997-1998 due to the banking sector collapse.
“Even more, if today we are 100 days toward 2021, but President Jokowi requires it for 2 weeks before the October 5th. Our president encourages his subordinates to inject assistance funds to the community for consumption, this aims to grow consumption during these 2 weeks, the stake is here. Therefore, the economics can grow and lessen the negative number to be less than 5.53 percent, and hopefully, it will be at around minus 2 percent.” Humas UNS
Reporter: Yefta Christopherus AS
Editor: Dwi Hastuti