Covid-19: Indonesia on a ridge path to regain growth

Mask-wearing awareness poster with Indonesian President Joko Widodo in Jakarta on August 26, 2020. AP - Dita Alangkara

Text by: Gabrielle Maréchaux Follow

3 min

The 267 million Indonesians are particularly affected by the coronavirus, both in health and economic terms.

The World Bank estimates that between 5 and 8 million people could fall back into poverty. 

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From our correspondent in Southeast Asia, 

By refusing general confinement, Indonesian President Joko Widodo explained at the end of March that he wanted to avoid a scenario similar to that of India or Italy.

Two countries where very severe confinement had dramatic economic consequences for the most precarious.

But eight months later, Indonesia's bet does not seem to be a winner from a health or financial standpoint. 

The archipelago is still fighting a very long first wave, but has never applied general containment or massive testing.

In addition, 6 million Indonesians have already lost their jobs, due to some local restrictions and border closures which have been devastating for the tourism and service sector. 

However, half of Indonesian workers work informally in these areas, as taxi drivers or street vendors, for example.

They were the first to be affected.

Aid not always paid 

The Indonesian government has certainly put in place aid to save the economy and the most vulnerable.

The amount is quite substantial: $ 48 billion.

In order to be efficient and to boost household consumption, which normally represents more than half of GDP, cash payments have been made in particular.

But they are not always used because they are based on somewhat dated allocation data, and because it currently takes a long and complicated procedure to benefit from them. 

But in the long term, Indonesia does not intend to continue this crisis interventionism and wants to find a more liberal orientation.

Indeed, President Joko Widodo was re-elected last year with the promise to do everything to achieve 5% growth each year.

But 2020 has undermined its plans with an unprecedented recession for Indonesia.

Serious social impact

The country managed to avoid it in 2005 after the very deadly tsunami for the country and in 2008 during the global financial crisis.

Today, Joko Widodo hopes to quickly find the path to growth.

He is betting for that on foreign investment.

A set of laws were thus passed in early October to make Indonesia attractive.

They are of great concern to the unions because the country has had to considerably relax its labor code, for example on minimum wages, working hours or unemployment insurance. 

But while waiting to see if this new legal framework will help the 10% of Indonesians below the poverty line out of precariousness, the coronavirus is already having a serious social impact.

For example, the number of early marriages has increased.

Because when a teenager becomes one more mouth to feed, marrying her is a ready-made solution to relieve a household. 

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