Covid-19 Pandemic and Severity of Economic Impacts: The Indonesian Case

Abstract

This study tends to examine the impacts of the Covid-19 pandemic on the Indonesian economy with the focus on economic growth, poverty, income distribution, unemployment, tourism sector, and businesses. More specifically, this study tries to answer the following two questions. First, how serious has been the negative shock of the Covid-19 pandemic on the Indonesian economy, especially on economic growth, employment, wages, poverty, inequality, tourism activities and businesses? Second, what were the main economic transmission channels through which the Covid-19 pandemic have caused that negative shock? It adopted an exploratory methodology with a comprehensive review of available literature, including policy documents, research papers, and reports and secondary data analysis. Data used was from the National Bureau of Statistics (BPS). It reveals that the Covid-19 pandemic has affected the Indonesian economy through four main channels: (i) declined domestic demand as a direct consequence of the "anti-Covid-19 impact" policy; (ii) declined export; (iii) declined imports of processed raw materials and auxiliary materials; and (iv) increased poor people as many employees have been laid off, or their wages were cut. As a result, the country's economy experienced a growth contraction of 2.07 percent, the number of foreign tourists visited Indonesia dropped significantly, the unemployment rate as well as the percentage of poor people increased, the Gini ratio experienced an increase, and many companies have suffered huge losses, especially in the tourism sector and also those whose businesses were very dependent on this sector such as transportation and food and beverage companies, as well as hotels and other accommodation provider companies.