I

ndonesia is preparing new measures that include cash transfers for underprivileged families and laid-off employees affected by COVID-19 and fundraising for health care, as the Group of 20 nations pledge a coordinated response to the coronavirus to prevent spillover effects on the economy.

Finance Minister Sri Mulyani Indrawati said the government was considering raising the amount of social funds for more than 15 million underprivileged families, adding the government would also roll out a training program and provide Rp 1 million (US$ 61.24) for laid-off employees for three months.

“We will help our communities to survive and receive essential goods while also obeying the government’s policy to reduce activities to contain the spread of the virus,” Sri Mulyani told reporters in a teleconferenced briefing on Tuesday following a meeting with finance ministers and central bankers of the G20 nations.

Sri Mulyani said the government was also considering raising its budget deficit limit from the current 3 percent of GDP, which would enable the government to raise more loans to finance social spending.

The government will, for example, provide cash transfers to informal workers and nearly double health spending to 1.5 percent of GDP from 0.8 percent.

“We will not be constrained with a 3 percent budget deficit since we are focused on maintaining public health and minimizing the risks of individuals and businesses going bankrupt,” Sri Mulyani said

President Joko “Jokowi” Widodo said Tuesday the government wanted to relax a limit on the state budget as it faced financial strains from the COVID-19 response. “We have been discussing this in the past few days and I have met with the House [of Representatives] speaker to get political support.”

The Finance Ministry identified Rp 62.3 trillion of spending in the 2020 state budget that could be reallocated to contain COVID-19 on top of the Rp 120 trillion provided by the government to disburse stimulus packages. The government also announced financial incentives for medical workers involved in the handling of COVID-19 patients.

The government, together with members of G20 nations, pledged for a coordinated policy response to mitigate the spillover of the health crisis into the economy, Sri Mulyani said.

“What we see right now is a global humanitarian and health crisis. All countries will try to contain the crisis to prevent significant spillover effects on the economy and financial sectors,” the minister said. “This may prevent economic and financial crises around the globe.”

The International Monetary Fund has called on governments to prioritize containment and strengthen healthcare systems following the G20 nations meeting together with international financial institutions.

“First, the outlook for global growth: for 2020 it is negative – a recession at least as bad as during the global financial crisis or worse. But we expect recovery in 2021,” said IMF managing director Kristalina Georgieva in a statement after the meeting.

“We stand ready to deploy all our $1 trillion lending capacity,” she said, adding the IMF was looking at other available options including special drawing rights and additional swap lines to ensure sufficient liquidity for countries as they fight the virus.

Meanwhile, the Institute for Development of Economics and Finance (Indef) has revised down Indonesia’s GDP growth projection for the year, with Indef macroeconomics researcher Rizal Taufikurohman estimating that major contributors to economic growth such as household consumption, investment and exports would drop significantly.

According to Indef’s economic growth scenario, the pandemic is likely to disrupt the Indonesian economy for up to three to six months, with all provinces affected and Jakarta to be the hardest hit, it said.

The revised Indef projection estimates household consumption dropping 4.8 percent to become the major contributing factor in dragging down the economy.

Indonesia’s overall exports would decline 3 percent, while direct investment would drop around 2.4 percent, according to the negative growth projection.

In terms of industrial sectors, Indef projects that processed animal products would see the biggest downturn of 7 percent, followed by electricity at 6 percent.

“The COVID-19 pandemic will cause a doom loop in supply and demand, with the economy disrupted on both sides,” said Indef economist Andry Satrio Nugroho.

Indef has also urged the government to impose a lockdown on hot zones across the country to curb the spread of the virus and resolve the public health crisis as quickly as possible.

“A lockdown will greatly affect the economy’s supply and demand, which will inevitably bring Indonesia to a recession. But it’s a bitter pill that we have to swallow to gain a larger economic benefit in the long run,” he said.

Andry also urged the government to invest more in the public health sector, as doing so would increase Indonesia’s capacity to combat the outbreak while creating demand for medical equipment.

“We should turn government spending in the public health sector into the main economic driver during the COVID-19 pandemic,” he said.