The Impact of the COVID-19 Pandemic on Indonesia’s Political- Economic Order

10.28.2020 | Articles | Ahmad Khoirul Umam, Muhamad Rosyid Jazuli

Introduction

The COVID-19 pandemic which started in Wuhan, China has now spread to 213 countries and territories. The spread of this pandemic has shown an exponential growth trend. The fatality rate, – the number of deaths divided by the total number of positive cases of COVID-19 – has increased from around 1% to 3.79%. This trend is indeed worrying.

The United States remains the epicenter of the pandemic (1), followed by Brazil (2), Russia (3), and India (4). According to the UNDP, the pandemic has begun to have a global socioeconomic impact.[1] As a result of large-scale social restrictions, it is predicted that around 40-60 million people will fall into extreme poverty. This is triggered by a decline in several major sectors. For example, international trade is expected to decline by up to 27% in the second quarter of 2020. Consequently, the income of countries originating from the balance of trade will also experience a significant decline.[2]

Meanwhile, the global tourism sector, which is a key source of income for many developing countries, has also been severely affected by this pandemic. International tourism is expected to decline by 850 million to 1.1 billion tourists, an economic loss of between USD $910 billion to USD $1.2 trillion. As a result of the sector’s economic slowdown, it is estimated that around 100-120 million jobs in this sector are at risk of being lost.

As a result, unemployment has risen sharply – 1.6 billion informal workers are expected to lose up to 60% of their income.[3] Likewise, remittances, which are an important source of foreign exchange for many low- and middle-income countries, are expected to decline by up to 20%. Amid this economic uncertainty, the world will also face the threat of a decline in the level of food crop production. It is estimated that the food crisis could increase twofold, with 265 million people in low and middle-income countries at risk of hunger at the end of 2020.[4]

If the COVID-19 pandemic cannot be stopped quickly and a vaccine is not discovered, the economic impact is likely to be worse than that of the Spanish Flu after World War I or the Great Depression.[5] If these conditions are not anticipated, the negative impact on the global economy will worsen, with the potential to threaten political stability and security in various regions.

Developed and developing countries, including countries in Southeast Asia, are beginning to feel enormous socioeconomic pressure from the pandemic. Several countries are already experiencing a recession, which is beginning to have a destabilizing political effect, as in Indonesia. For this reason, this paper discusses the implications of the COVID-19 pandemic on Indonesia’s current political-economic dynamic in detail and also Indonesia’s economic and political outlook if the threats posed by the pandemic are not appropriately handled.

[1] United Nations. “Putting the UN Framework for Socio-Economic Response to COVID-19 Into Action: Insights”, June 2020

[2] United Nations. “Putting the UN Framework for Socio-Economic Response to COVID-19 Into Action: Insights”, June 2020

[3] International Labour Organization (ILO). “COVID-19 and the world of work. Fifth edition Updated estimates and analysis”, 30 June 2020.

[4] United Nations. “Putting the UN Framework for Socio-Economic Response to COVID-19 Into Action: Insights”, June 2020

[5] International Monetary Fund (IMF). “Policy Responses to COVID-19: Indonesia Chapter”, 6 March 2020. https://www.imf.org/en/Topics/imf-and-COVID19/Policy-Responses-to-COVID-19#I