Reduce Coronavirus’ Impact on Economy

KOMPAS/TOTOK WIJAYANTO

Planes are on standby at Terminal 3 of Soekarno-Hatta International Airport in Tangerang, Bentan, on Monday (2/3/2020). To anticipate sluggishness tourism due to the new coronavirus, the government is offering 50 percent discounts on plane tickets to 10 tourist destinations in Indonesia from March to May.

Indonesia is entering a new phase in its fight against the spread of the novel coronavirus with the President’s announcement of the first two confirmed Covid-19 cases in the country on Monday (2/3/2020).

The government has a vested interest in preventing the viral spread from snowballing and having an adverse impact on the economy.

Panic, whether in the government, among businesses or the general public, will certainly not help the situation. People are worried that the two confirmed cases are just the tip of the iceberg, considering that Indonesia’s neighbors were exposed to the virus much earlier. There is an impression that the government is not taking things seriously, considering that it will not be easy to protect all 135 of the country’s ports of entry.

The government’s credibility is at stake here. The public will not be convinced by narratives on how the government is ready to respond. Real preparedness in the field, especially preventive measures, is far more important. In several cases, blundering official statements have only offered a superficial feeling of security and might have even exacerbated public distrust in the nation’s readiness to curb the virus’ spread.

This daily has also warned that it is important to protect the economy from the impacts of the coronavirus outbreak, including through stimulus packages. However, curbing the virus’ spread and protecting the people are far more important. This will engender public trust. Without it, no economic stimulus will mean anything.

We cannot underestimate the outbreak’s impact on the economy. The finance market responded to the President’s announcement of Indonesia’s first confirmed Covid-19 cases with both the rupiah exchange rate and the Jakarta Composite Index (JCI) plummeting, on investors’ concerns over the economic impacts of the virus’ spread. Despite our relatively strong banking sector, we also need to anticipate the outbreak’s impacts on bad credit.

KOMPAS/LASTI KURNIA

Pedestrians walk near screens displaying stock prices at the Indonesian Stock Exchange (IDX) in Jakarta on Monday (2/3/2020). After the government announced that two Indonesian citizens had tested positive for the new coronavirus, the main stock market index fell to 5,361 points at the close of trade on Monday (2/3), down 1.68 percent from last week\'s close.

It is advisable for the government and other stakeholders to work together in addressing the unforeseen impacts of the outbreak. For instance, the International Monetary Fund (IMF) has lowered its global growth forecast as a result of the outbreak – a forecast that was already affected by the China-US trade war. A number of countries, whose economies are facing a potential recession from the outbreak, have been forced to do the same.

As a result, Indonesia’s economic growth this year could dip below 5 percent.

Due to the strong economic partnership between Indonesia and China, where the virus originated, every 1 percent decrease in China’s growth is projected to prompt a 0.1-0.3 percent decline in Indonesia’s growth. As a result, Indonesia’s economic growth this year could dip below 5 percent. Some sectors are already feeling the impact, such as tourism, manufacturing, trade and export-oriented sectors like commodities and mining, which have caused a chain reaction to affect other sectors. Several sectors have halted operations, with hundreds of thousands of workers sent home in early 2020.

KOMPAS/LASTI KURNIA

A truck is parked near pile of containers at Operational Terminal 3 of Tanjung Priok Port in North Jakarta on Thursday (20/2/2020). Statistics Indonesia (BPS) noted that non-oil and gas exports and imports to and from China decreased in January but said the decline could not be entirely blamed on the outbreak of a new type of coronavirus.

The government’s plans to launch a variety of stimuli and improve the investment climate are facing new challenges: The trade war, the insurance default and now, the novel coronavirus. This is a big test for our economy, especially since the country has been making efforts over the past several years to accelerate investment and growth in order to escape the middle income trap. A strong leadership, taking real steps that follow the best practices of other countries that have successfully contained the virus, would be a good start to boosting credibility.