Long road to recovery for Indonesia

Long road to recovery for Indonesia

Health and economic priorities appear at odds as Covid infection rates remain high.

The days leading up to the Eid al-Adha festival, which this year will fall on July 31, are usually the busiest days of the year for Bintang Sapi Madani, a cow breeder in Bogor on the outskirts of Jakarta.

The company specialises in breeding sacrificial cows, also known as qurban, for the Muslim festivities, but the Covid-19 pandemic has put a strain on the business. Sales have plunged as consumer purchasing power is severely affected, he says.

The annual feast of sacrifice obliges Muslims with the financial means to buy prime and healthy livestock and to slaughter them in accordance with Islamic protocols. The meat is then distributed to the needy.

"Sales have dropped significantly. Sacrificial cow traders so far have seen less than 50% of last year's sales. We also face competition from seasonal traders who set up temporary shops in city centres, so there is an oversupply, while the demand has weakened," Muhammad Arif, a manager at Bintang Sapi Madani, told Asia Focus last Wednesday.

"[Breeders] were expecting to see a rebound in sales during this season since they lost the momentum to generate business during the end of Ramadan festivities when there was little demand for meat because we had large-scale social restrictions at the time."

The global economic turmoil caused by the pandemic has had a severe impact on Indonesia, with most Indonesians experiencing income losses, the World Bank said in its latest Indonesia Economic Prospects report released on July 16 in Jakarta.

Mobility restrictions imposed to curb the spread of the virus, and caution among consumers worried about their financial prospects, have led to a freeze in tourism and empty shops and restaurants. The country's economic growth is projected to fall to zero this year, the report said.

By some standards that would not be a bad performance, given that dozens of countries are resigned to a contraction in gross domestic product (GDP) in 2020.

But Indonesia could easily end up in the red if the government has to reimpose large-scale social restrictions to combat a new wave of Covid-19, cautioned Frederico Gil Sander, lead economist with the World Bank office in Indonesia.

"We think that the economy could contract by two percent in 2020," Mr Sander said.

The option to reinstate social restrictions remains on the table in Jakarta, after Governor Anies Baswedan said on July 12 that the capital could apply the emergency brake following a rise in positive virus test results to 10.5% of the total, from an average of below 5% for the previous two weeks. World Health Organization (WHO) guidelines for policymakers seeking to resume economic activity suggest a 5% positive rate is the maximum.

Jakarta remains one of the infection hotspots in the country with 17,621 cases as of July 22. But it has slipped to second nationally after East Java province, which has now recorded 19,093 cases out of the national total of 91,571.

Jakarta is attempting a transition as it introduces a set of new habits for residents to adopt. Strict compliance to social distancing and health protocols continue to be required as part of the gradual easing of restrictions, while a plan to reopen movie theatres on July 29 was postponed.

A key finding the World Bank report suggested that to support a safe reopening of the economy, having a robust health system remains the priority. A safe sustainable reopening requires continued improvements in health system capacity and readiness, including continued expansion of testing and surveillance.

To date, Indonesia has tested 749,626 people in a population of 267 million. According to the WHO in its weekly situation report on Covid-19 in Indonesia, Jakarta is the only province that has achieved the minimum case detection benchmark, or comprehensive surveillance and testing of suspected cases, of 1 per 1,000 population per week.

In any case, the business community appears eager to get on with normal life again, according to a survey conducted by the Jakarta-based pollster Indikator Politik Indonesia and released on July 23.

Despite the escalating number of cases and widespread infections, 65.1% of the 1,176 respondents are not in favour of the government reinstating mobility restrictions, although 84.7% of them remain "very concerned" about the outbreak, the pollsters found.

The respondents included businesspeople from micro enterprises to big corporations in seven sectors across nine provinces.

"About 53.3% of the respondents prefer the government to prioritise handling the economic sector over the health sector, while 89.4% agreed with the government's initiative to introduce adaptation to new habits," Indikator executive director Burhanuddin Muhtadi said at a briefing.

The government has announced a fiscal package amounting to 4.3% of GDP in response to the crisis, which includes funds to improve the preparedness of the health sector and a substantial increase in social assistance.

Without a significant expansion of social assistance, according to the World Bank report, roughly 5.5 million Indonesians could fall into poverty because of the economic halt triggered by the pandemic. The stimulus package could go a long way to mitigate the impact of the pandemic on poverty if fully disbursed and well-targeted, it said.

"It is essential that the package be effectively implemented to have the fullest impact on the people and the economy," said Satu Kahkonen, the World Bank country director for Indonesia and Timor-Leste.


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