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Income gap expected to widen in economic crisis
There may be a "more polarized society which could have significant social and economic implications”.
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General image of Indonesia's economy. (Bloomberg/File)
T
he economic crisis unleashed by the coronavirus pandemic will deepen the income gap as some sectors and income groups may recover sooner than others, economists have said, describing this phenomenon as a “K-shaped recovery”.
A K-shaped recovery highlights the divergent experiences of individuals during the pandemic, in which some workers are able to work from home and continue with their jobs, while others do not have such privileges, said Mandiri Institute head Teguh Yudo Wicaksono.
“The big issue going forward is income divergence as those with the highest income may not be affected greatly by the pandemic, while those with lower and middle incomes may experience job losses and pay cuts,” he told The Jakarta Post in a press briefing on Thursday.
As a result, there may be a "more polarized society, which could have significant social and economic implications”, he went on to say. It will be crucial to bring the pandemic under control to have “a full and whole economic recovery”.
Indonesia implemented large-scale social restrictions (PSBB) in the second quarter this year as it called for people to work from home. The economy is expected to contract for the first time since the 1998 Asian financial crisis as the government expects the economy to shrink by 0.6 percent to 1.7 percent this year.
The economy shrank by 5.32 percent in the second quarter, but some sectors including information and communications technology (ICT), agriculture and financial sectors managed to record growth, while others including transportation and accommodations declined significantly.
The K-shaped recovery theory has gained traction in recent months to explain how things will get better for the haves and worse for the have-nots, as well as to explain industry trends, according to several economists.
