Adrian Wail Akhlas, Jakarta – The nation's high unemployment rate is expected to worsen and continue into next year as the country braces for further economic consequences of the COVID-19 crisis, senior government officials said on Monday.
Some 5.5 million people may lose their jobs this year, pushing the unemployment rate to between 8.1 and 9.2 percent, up from 5.28 percent last year, according to National Development Planning Minister Suharso Monoarfa.
As a result, up to 12.7 million people are expected to be unemployed by next year, up from 7.05 million people in 2019. The government's baseline scenario for next year predicts that the unemployment rate will be between 7.7 and 9.1 percent.
"If the [economic] condition persists throughout the year, we are worried that unemployment will reach 10.7 million to 12.7 million in 2021," Suharso said during a parliamentary hearing on Monday.
The coronavirus has forced people to stay at home, disrupting business activity as shops, factories and offices have shut their doors. As economic activity languishes, millions of Indonesians have lost their jobs and are in danger of falling into poverty.
As of May 27, more than 1.79 million people had lost their jobs after nonessential businesses shut down to comply with government restrictions, according to data from the Manpower Ministry.
"We are hoping that jobs will return to near prepandemic levels," Suharso said.
The government expects 4 million additional people to fall below the poverty line this year, making for a total of 28 million people in poverty in the nation, or around 10.6 percent of the population, up from 9.2 percent in September of last year.
"With government's intervention, we could reduce [the number of additional people who fall into poverty] to under 1 million so that it does not reach double digits this year," said Suharso.
The government is targeting a poverty rate of between 9.2 percent to 9.7 percent next year, according to the minister.
The government has allocated Rp 695.2 trillion (US$49.2 billion), or 4.2 percent of the gross domestic product (GDP), to fight the COVID-19 pandemic. Of that figure, Rp 172.1 trillion has been designated for the social safety net, far higher than the previous plan's allocation of Rp 110 trillion.
Indonesia's economy has been hit hard by the pandemic. It grew 2.97 percent in the first three months this year, the weakest since 2001, as household spending and investment growth slowed.
The government expects the economy to shrink by 3.8 percent in the second quarter of this year, Finance Minister Sri Mulyani Indrawati said during the same hearing.
Sri Mulyani revised the country's expected GDP growth down to between negative 0.4 percent and positive 1 percent this year because of feeble economic activity and depressed commodity prices.
"The government is currently focusing on the economic recovery in the third and fourth quarters from the contraction in the second quarter," Sri told lawmakers. "We will use our policy instruments, supported by Bank Indonesia, to maintain recovery momentum."
The government is hoping the economy will grow by 4.5 to 5.5 percent in 2021 on the back of a global economic recovery as the pandemic subsides.
The World Bank expects the country's poverty rate to increase by 2.1 to 3.6 percentage points this year, which would mean between 5.6 million and 9.6 million people could fall into poverty this year.
"There is a need for adequate protection for vulnerable communities," World Bank senior economist for Indonesia Ralph Van Doorn said recently. "We are concerned that the value of the stimulus package may not be enough to offset the economic impact on households."
The World Bank now projects zero percent growth for Indonesia this year as the COVID-19 crisis causes the global economy to experience its deepest downturn since World War II.