The government has projected that millions of people will fall into poverty and unemployment as the COVID-19 pandemic batters the Indonesian economy, Finance Minister Sri Mulyani Indrawati has said.
Under the “bad” scenario, 1.1 million new poor and 2.9 million new unemployed people would be added. The worst-case scenario projected 3.78 million people would fall into poverty and 5.2 million would lose their jobs.
Statistics Indonesia (BPS) data showed that the country’s unemployment stood at 7.05 million out of the workforce of 133.56 million last year. Meanwhile, 24.79 million people lived in poverty – 9.22 percent of the population – a decline of about 880,000 compared to the year before.
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“In a severe situation, it is possible that our growth will fall to a negative level,” Sri Mulyani said during a livestreamed briefing after a limited Cabinet meeting on Tuesday. “This situation will definitely affect our social and development conditions.”
The government has projected that Indonesia’s gross domestic product (GDP) growth will fall to a 21-year low of 2.3 percent this year under the baseline scenario, and the economy could even contract 0.4 percent under the worst-case scenario.
The World Bank recently slashed Indonesia’s economic growth projection from 5.1 percent to 2.1 percent this year as a result of the pandemic. It also projected more than 11 million people could fall into poverty in the East Asia-Pacific region, a stark contrast to its earlier forecast that economic growth would be enough to lift 35 million people out of poverty this year.
World Bank lead economist for Indonesia Frederico Gil Sander warned that millions of Indonesians, including those from poor families and informal workers, were lacking economic security and that the situation would expose them to shocks caused by the pandemic.
As many as 2.8 million people had lost their jobs as of Monday, according to data from the Manpower Ministry and the Workers Social Security Agency (BPJS Ketenagakerjaan). More than half were furloughed and placed on paid or unpaid leave.
In addition, about 70 million informal workers were at risk, as they had lost their incomes as a result of the call for social distancing.
Sri Mulyani said that the second quarter would be the hardest quarter this year as economic growth could fall to 0.3 percent and could even contract by 2.6 percent during the period before slightly recovering to 1.5 percent to 2.8 percent in the third quarter.
“If the hard situation lasts long enough, there is a possibility of recession in which Indonesia’s GDP contracts for two consecutive quarters. This is what we’re trying to avoid,” she said, adding that the growth scenarios were dependent on the pandemic’s progression.
She added that the government had prepared measures to address and solve such challenges, including measures that had been outlined several times by President Joko “Jokowi” Widodo.
“We will use the state budget to focus on the healthcare sector – which includes measures to contain the COVID-19 outbreak – on the social safety net and on support for informal businesses, micro, small and medium enterprises and formal businesses as the outbreak’s impacts include layoffs that will affect social development,” Sri Mulyani said.
The government has set aside Rp 436.1 trillion (US$26.36 billion) in funding, equivalent to 2.5 percent of the country’s gross domestic product (GDP), for stimulus packages focusing on healthcare spending, social protection and economic recovery programs. (prm)