Long road to recovery for Indonesia

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

The company specializes 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 have seen less than 50% of last year’s sales. We also faced competition from seasonal traders who set up temporary shops in city centers, so there was an oversupply, while the demand had weakened,” said Muhammad Arif, a manager at Bintang Tani Madani.

“[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 the 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,” Sander said.

Jakarta administration has extended the transitional period of its large-scale social restrictions for another two weeks until August 13,  Governor Anies Baswedan announced on Friday.

The city has seen a surge in new cases, including in at least 90 workplaces which have emerged as new infection clusters as more employees have resumed working in offices despite city regulation that during the transitional period, workplaces have to slash by half their employees’ presence in the office.

“We will impose a progressive fine for businesses and could eventually close the establishment that repeatedly violates the health protocol,” Baswedan said.

To deter people’s unnecessary mobility, the city administration started on Monday to reimpose the odd-even license plate policy as a form of its “emergency brake” to curb the spread of the coronavirus.

Jakarta remains one of the infection hotspots in the country with 22,616 cases as of August 3 and its positive virus test rate is 6.5% of all tests results, well above the World Health Organization (WHO) guidelines which suggest a 5% positive rate as the maximum benchmark for policymakers seeking to resume economic activity.

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 841,027 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 favor 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 prioritize 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.

The story has been updated from its original version in Bangkok Post

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