Economic crisis due to pandemic: What makes Indonesia survive? | Bahasa
Bank DBS Indonesia holds Asian Insights Conference to share perspectives about Indonesia’s financial condition amid the Covid-19 pandemic
Leading up to DBS Asian Insights Conference 2020, Bank DBS Indonesia held DBS Insights for Business Leaders to observe, analyse and present the perspectives of experts on the latest economic conditions. In a session titled ‘Economies in Transition (Indonesia)’, DBS Chief Economist Taimur Baig had a discussion with President Director of PT Bank DBS Indonesia Paulus Sutisna to present insights about Indonesia’s economic condition amid the pandemic.
Following is the summary of the discussion about Indonesia’s economic condition amid the pandemic:
- Comparison between the 2020 pandemic-triggered crisis and the 1998 crisis
Before the Covid-19-triggered global crisis, Indonesia experienced a similar situation in 1998. Compared with the 1998 crisis, Indonesia’s economy is far stronger and healthier today. This is reflected in several aspects, including the five-fold increase in the gross domestic product (GDP) to USD1.1 trillion and a seven-fold increase in foreign exchange reserves to USD129 billion.
External debt, which is always a concern, increased by 3.1 times to USD404 billion. One aspect that needs to be underlined is that Indonesia’s debt-to-GDP ratio has declined to 36% from 57%. Interestingly, Indonesia, both in 1998 and 2020, saw the rupiah depreciate to 16,500-16,600 to the dollar. The difference is that the depreciation rate in 2020 was 16% compared to 500% in 1998.
Paulus Sutisna revealed that the most significant difference was felt in terms of political stability. “In contrast to the political situation in 1998, which was very unstable, the current condition is far more stable, with President Jokowi serving his second term. In addition, the Jokowi government has issued various stimulus policies aimed at reducing poverty.”
Also, unlike in 1998 when social security protection was not available, the public is now well-protected by the social security programme or Healthcare and Social Security Agency (BPJS Kesehatan) that allows them to enjoy free medical treatment. To minimise the impacts of Covid-19, the government has increased the state budget by USD27 billion to finance health services.
In addition to Indonesia’s far more stable economic condition today, Taimur sees that the Jokowi government’s policies also give significant impacts. “Various stimulus that are implemented with a main focus on providing services for the poor should help maintain economic stability.”
- Efforts to seize opportunities amidst Covid-19 pandemic
Although Indonesia has been hit by a Covid-19-triggered economic crisis, Bank DBS Indonesia sees that the digital economy has the potential to drive national economic recovery. As one of the countries with the highest social media participation, Indonesia has seen rapid growth in digital economy over the past decade. Indonesia has six unicorns, namely Gojek, Tokopedia, Bukalapak, Traveloka, OVO and JD.ID.
With the large-scale social restrictions (PSBB) imposed by the government amid the pandemic, the logistics sector is enjoying a positive trend as people tend to shop on e-commerce to fulfill their daily needs. As one of the pioneers of digital banking in Indonesia, digibank by DBS has seen an increase in popularity and reliance on e-commerce during the pandemic.
“We are fortunate because we have been equipped with capable technology infrastructure during the pandemic. Regarding digibank by DBS, we see a much better acceptance during this pandemic. Today’s condition offers a strong opportunity to bring in new customers as they shift from transactions at branch offices to transactions via mobile phones. With new features added to the application, digibank by DBS is able to meet the growing and fast-changing customer needs,” Paulus said.
From the corporate side, the work from home (WFH) policy has also encouraged people to utilise digital channels such as IDEAL from Bank DBS Indonesia that also posted growth amid the Covid-19 pandemic. “As employee safety becomes the main priority, 62% of Bank DBS Indonesia employees are able to work from home. This transformation allows employees who are currently working from home to minimise disruptions when serving customers. This is a reality during the Covid-19 period; in the past, everything took longer to be implemented in terms of digital, but now it’s happening and working. This is a one way move that won’t ever go back to the old school method,” Paulus and Taimur added.
- Indonesia’s economic condition post-Covid-19 pandemic
Health infrastructure in Indonesia is facing many challenges and is expected to take longer to recover compared to other ASEAN countries with stronger and more solid health infrastructure. Several studies predicted that Indonesia’s health condition will recover in September-October 2020.
“Unlike the health condition, Indonesia’s economy is expected to recover faster. This is possible because Indonesia is one of the countries with strong domestic demands,” Paulus said. Historically, Indonesia’s average export-to-GDP ratio is 20%-25%. In a normal situation, Indonesia lags behind other countries that have a higher percentage.
Taimur shared Paulus’ opinion, adding that, “Amid the pandemic, countries like Indonesia actually enjoy benefits. Thanks to a strong domestic demand, Indonesia does not need to focus too much on export and can focus more on government spending that can boost Indonesia’s economy.” In other words, the current condition drags down the economy of several countries that initially grew faster than Indonesia when external demand slowed. On the contrary, countries like Indonesia that depend on domestic demand have the potential to survive better.
The Covid-19 pandemic has dramatically changed the global order, paralysing the global economy, including Indonesia. Entering the new normal, it is time for people to reorganise their life and to start making up for the losses caused by the pandemic.
Through the DBS Asian Insights Conference 2020, Bank DBS Indonesia gathered experts from the Government as Mr. Bahlil Lahadalia; Head of Indonesian Investment Coordinating Board (BKPM), Mr. Ridwan Kamil, Governor of West Java and experts in economic, as well experts in the field of sustainability to share their perspective related to not only Indonesia’s economy condition recovery, also the environmental conditions or sustainability in Indonesia, as well measures that can be done. Held virtually, this annual conference has two main topics, namely “Economy and Politics: Recovery from COVID19 - What’s Next?” and “Fixing a Fragile World: Anticipating the Next Black Swan?”
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