Adrian Wail Akhlas, Jakarta – Indonesia expects a long road to full economic recovery after Jakarta brought back strict social restrictions measures amid a continued rise in the number of coronavirus cases.
A full economic recovery would take at least two to three years, Coordinating Economic Minister Airlangga Hartarto said on Thursday following the Jakarta administration's decision to reimpose large-scale social restrictions (PSBB) relaxed in early June.
"If virus cases rise, then the economy will take a hit. The government expects that it will take until 2022 or even 2023 [for the economy] to return to pre-COVID-19 levels," he told a virtual business forum held by Indonesian Chamber of Commerce and Industry (Kadin).
"The economy is not only about the fundamental factors but also the sentimental factor, particularly in the capital market," he went on to say, adding that "pulling the emergency brakes would need to be done by maintaining public confidence in the economy".
His statement comes as the capital is set to require non-essential industries to have their employees work from home, to limit the use of public transportation and to prohibit dining in restaurants starting on Monday, similar to measures imposed from April to June, Jakarta Governor Anies Baswedan said in a press briefing late on Wednesday.
Indonesian stocks fell by more than 5 percent at closing after hitting the circuit breaker on Thursday morning, following the announcement. The decline in the benchmark Jakarta Composite Index (JCI) stood in contrast with gains seen in most markets across Asia. The rupiah, meanwhile, weakened 0.38 percent against the United States dollar to 14,855.
Jakarta has recorded a daily average of over 1,000 new cases this month and registered nearly 43,400 infections and 1,330 deaths from COVID-19 since the pandemic began, according to government data, as the city gradually relaxes its restrictions. Indonesia has recorded more than 203,000 cases as of Thursday with 8,336 fatalities.
The capital city contributed the most to the national economy compared to other regions in the country as Jakarta's regional domestic product accounted for 17.17 percent of the country's gross domestic product (GDP) in the second quarter, Jakarta Statistics Indonesia (BPS) data shows. It was followed by East Java (14.6 percent) and West Java (13.45 percent), both also virus epicenters.
The government will ramp up spending to increase the capacity of hospital beds and make vaccines available in the first quarter next year, Airlangga said.
"Around 30 million vaccine [doses] will be available by the first quarter next year at the earliest, and the rest will follow in the second and third quarters," he said, adding that the pandemic response and economic recovery efforts in 2021 would be supported by efforts to vaccinate people.
The government will expand some social protection programs into next year, including cash aid for formal workers for the first three months next year and cash transfers for micro, small and medium enterprises (MSMEs) during 2021's first half, Airlangga went on to say.
The government still expects GDP to grow by 4.5 percent to 5.5 percent next year as the economy is likely to contract this year. It projects the economy to shrink by 1.1 percent at worst or grow by 0.2 percent at best this year.
"The economy is more likely to contract than grow in the third quarter this year, even without other movement restrictions," Bank Central Asia (BCA) economist David Sumual told the Jakarta Post on Thursday. "The economy has been losing steam since August as virus cases jump."
Indonesia's economy shrank 5.32 percent in the second quarter as household spending and investment contracted.
Although the country's healthcare facilities are better now compared to during March and April, further restrictions by Jakarta administration will still take a heavy toll on economic activity, he went on to say.
"The severity of economic contraction would depend on how long it would take to restrict people's activities."
Indonesian Chamber of Commerce and Industry (Kadin) deputy chairwoman Shinta Kamdani called on the government to pay more attention to small businesses and large corporations.
"Although domestic demand has picked up gradually, the PSBB policy will heavily affect employment as businesses in transportation and [food and beverages], among other sectors, will be forced to furlough their employees again," she told the Post.
Shinta added that ensuring activity in sectors that were allowed to operate during the PSBB policy would be key to prevent further job losses, and the government should ensure the continuity of export-oriented manufacturing industry operations as global demand for Indonesian goods had risen gradually.
"We are trying to keep the manufacturing industry operating amid rising global demand, and we want to ensure that their activities are not being affected by PSBB measures."
The association, Shinta added, would seek permission from the Industry Ministry and regional administrations, including Jakarta, to continue operations for companies that implemented strict health protocols.