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Jakarta Post

[ANALYSIS] Robust labor market and MSMEs as engine of recovery

  • Faisal Rachman

    The Jakarta Post

Jakarta   /   Wed, November 11, 2020   /  12:00 am
The Jakarta Post Image
Government subsidies for MSMEs. (JP/Hengky Wijaya)

Indonesia has officially entered a recession as the economy shrank by 3.49 percent on an annual basis in the third quarter of 2020 after recorded a 5.32 percent contraction in the second quarter. This marks the first recession for Southeast Asia’s largest economy since the 1998 Asian Financial Crisis. The COVID-19 pandemic has restricted public mobility, increased individual precautionary behavior and decreased income in general, leading to a significant drop in domestic demand. This shock, in turn, has depressed the supply side of the economy, which forced many firms to scale back investment and production, thus laying off workers particularly in the sectors of manufacturing, trade and hospitality. Meanwhile, more than half of those who remained at work must deal with lower income, which at the end of the day created a vicious circle leading to an economic crisis. On the ...