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Targeting protection for vulnerable groups amid global recession
The exclusion errors of the government's social safety net program during the pandemic indicate that the provision of targeted social protection must be improved, especially for the six provinces most likely to be impacted hard the global recession.
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Citizens in need: Local people line up for the government’s cash transfer program in Rangkasbitubung district, Lebak regency in Banten on Nov. 13. Over 1,000 lower-income families from nine districts are entitled to the assistance disbursed under the Family Hope Program. (Antara/Muhammad Bagus Khoirunas)
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ising energy prices, the persistent war in Ukraine and sluggish revival of the production sector have dragged the global economy into a recession. Exponentially increasing prices have necessitated many central banks to adopt a more stringent monetary policy by increasing interest rates, thus slowing economic growth further.
The International Monetary Fund released in October its World Economic Outlook 2022, which garnered worldwide attention over its downgraded global economic growth projections for 2023, particularly in the United Kingdom (0.31 percent), the United States (1.00 percent), France (0.66 percent), Italy (minus 0.18 percent), Germany (minus 0.29 percent) and Russia (minus 2.28 percent).
Indonesia has been identified as a “bright spot” amid the deteriorating global economy, with the IMF estimating that Indonesia's gross domestic product (GDP) will grow 5 percent in 2023 and IMF managing director Kristalina Georgieva tweeting: “Indonesia remains a bright spot in a worsening global economy!"
However, Indonesia must be vigilant and remain attentive to any potential risks.
Indonesia's reliance on its sizeable domestic market and its relatively limited integration with the global economic system has enabled it to remain resilient in the face of economic adversity. Nevertheless, the Indonesian economy can still experience a contraction if domestic consumption grows negatively, as we saw between the second quarter of 2020 and the first quarter of 2021.
Inflation is likely to have a deleterious effect on individuals' buying power, thus diminishing the consumption growth rate. Nevertheless, the decrease in the inflation rate in November to 5.42 percent, after attaining its zenith in September at 5.95 percent, has brought a breath of fresh air to Indonesia. It is unlikely that consumption growth will be heavily impacted.
Special attention should be given to industries that are connected to the international market, such as export businesses and the tourism industry.
