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Jakarta Post

Avoiding quarantine will inflict greater economic harm, says survey

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Mon, April 6, 2020   /   08:16 am
Avoiding quarantine will inflict greater economic harm, says survey A resident stands guard at the entrance to the Bukit Pasir Putih residential complex in Depok, West Java, on Tuesday, March 31. Residents have closed access to the complex in the wake of COVID-19 outbreak. (JP/Riand Alfiandy)

The government’s decision to avoid imposing regional quarantine measures to contain the COVID-19 pandemic is expected to inflict greater economic harm than if any such policy was imposed to slow down infection, a survey of 145 economists has found.

Around 90 percent of the economists were in agreement that avoiding quarantine will result in greater economic damage. The survey was conducted by seven economic scholars from the University of Indonesia, Gadjah Mada University, Leiden University in the Netherlands and UC Davis University in the United States.

The survey, supported by the Indonesian Regional Science Association (IRSA), saw 54 percent of the 145 economists respond with “strongly agree” that avoiding quarantine will result in considerable harm, while 36 percent “agree”.

“We see that the government’s public health policy has yet to be as thorough as what public health experts have suggested. Therefore, we see economic policy as maybe being flat if the spread of the virus continues,” Halley Yudhistira, an economist from the University of Indonesia, told The Jakarta Post.

Read also: 70 million informal workers most vulnerable during pandemic

President Joko “Jokowi” Widodo declared a public health emergency on March 31 and imposed large-scale social restrictions. He ruled out a lockdown option despite calls from health experts and regional leaders to implement local quarantine measures to slow down the infection and fatality rates, as 2,092 cases were reported with 191 dead, among the highest death rates in the world.

“We want economic activities to carry on, but our people should keep their distance from each other. Social distancing, physical distancing, that’s the most important point,” the President said. Jakarta Governor Anies Baswedan had requested for Jakarta to implement regional quarantine measures to no avail, as Jakarta, the nation’s epicenter of the virus, accounts for half of COVID-19 cases and deaths in Indonesia.

Economists in the survey agreed that the government should take more comprehensive measures to slow down the spread of COVID-19 and invest more in the healthcare system, recognizing that the economy would take a significant hit in the short-term.

“Public health intervention such as large-scale social distancing, health quarantine and regional quarantine need to be a policy priority for the government to consider,” the scholars wrote in the survey findings. “The majority of the economists view a social safety net as the most-needed policy if the government implements large-scale social restrictions or regional quarantine.”

Few vehicles are seen on the usually busy Sudirman street as the government called on people to stay home amid the COVID-19 coronavirus outbreak in Jakarta on March 31, 2020. - Indonesian leader Joko Widodo declared a state of emergency March 31 as coronavirus deaths in the world's fourth most populous country jumped again, but he resisted calls for a nationwide lockdown. Few vehicles are seen on the usually busy Sudirman street as the government called on people to stay home amid the COVID-19 coronavirus outbreak in Jakarta on March 31, 2020. - Indonesian leader Joko Widodo declared a state of emergency March 31 as coronavirus deaths in the world's fourth most populous country jumped again, but he resisted calls for a nationwide lockdown. (AFP/Adek Berry)

The survey involved economists from various backgrounds including researchers, professors and state officials.

The survey’s findings were in line with a new study titled “Pandemics depress the economy, public health interventions do not: Evidence from the 1918 flu”, which found that, while pandemics depress economies, aggressive public health interventions could bounce back the economies faster.

“We find that cities that intervened earlier and more aggressively do not perform worse and, if anything, grow faster after the pandemic is over. Our findings thus indicate that NPIs not only lower mortality; they also mitigate the adverse economic consequences of a pandemic,” the study concludes, referring to non-pharmaceutical interventions (NPIs) such as physical distancing.

Timely and aggressive NPIs can limit the most disruptive economic effects while also contributing to “flattening the economic curve” beyond more traditional economic policy interventions, according to the study.

Read also: Moody's lauds Indonesia's economic response but virus containment efforts lag

“Altogether, our findings suggest that pandemics can have substantial economic costs, and NPIs can have economic merits, beyond lowering mortality,” reads the study, conducted by US Fed economists Sergio Correia and Stephan Luck and Massachusetts Institute of Technology scholar Emil Verner.

The Indonesian government projects Indonesia’s economic growth to slow to 2.3 percent this year, the lowest in 21 years, from 5.02 percent in 2019. In a worst-case scenario, the economy could contract 0.4 percent this year, according to Finance Ministry presentation material.

To prevent an economic meltdown, the government announced Rp 405.1 trillion (US$24.6 billion) in additional state spending on health care, a social safety net and a business rescue program, including tax incentives and liquidity support.

To fund the effort, the state budget deficit has been allowed to widen beyond the previous legal limit of 3 percent of GDP. Also, Bank Indonesia (BI) would be allowed to buy government bonds directly, throwing a lifeline to the state budget.

World Bank East Asia Pacific chief economist Aaditya Mattoo said the pandemic required drastic action such as strong social distancing and travel restrictions. The effectiveness of such measures would depend on the level of preparedness in the country, he said.

“A lockdown will inflict significant economic pain on those least stable to take care of themselves,” Mattoo said in a conference media briefing on March 30. “The [government’s] priority has to be to find a way to soften the pain both for households and informal workers.”

Read also: World Bank calls for safety net, drastic action in Indonesia’s fight to contain COVID-19

Mattoo explained that the government could devise a new paid leave arrangement: “It serves a double benefit: They soften the pain while also encouraging workers to stay at home.”

The government also needed to try and think of credit liquidity transfers to firms and tax payment exemptions for them, he added.

“These are the complementary economic measures that, in the short run, when people can neither work nor consume as freely as they would have, are absolutely essential to minimize the economic pain and prevent short-term economic shocks.”