Indonesia’s Economic Rewind in 2020

The year 2020 was a challenging year because the Covid-19 pandemic affected various sectors worldwide, one of them is the economic sector. In 2020, many world institutions predicted that global economic growth would record the deepest contraction in history since the Great Depression or World War II. The flashback of the Indonesian economy has shown that the economic downturn occurred in the second quarter of 2020. It has been inseparable from the implementation of limited lockdown or Large-Scale Social Restriction (PSBB) nationally.

The implementation of lockdown has impacted the economic sector due to the limited space for businesses and the unpreparedness of entrepreneurs to implement this regulation. People’s purchasing power has decreased while production process continues. In the end, many companies are forced to lay-off their employees and close their businesses. This really has affected the welfare of Indonesian society because the number of unemployment is increasing due to the Covid-19 pandemic.

At the beginning of 2020, the Government was still optimistic about the growth of the national economy. However, the first Covid-19 case was just found in Indonesia at the end of March 2020, so that the Government took a preventive step in the form of Large-Scale Restrictions from April to June 2020. This caused the economy during April-June 2020 to experience a deep contraction, namely around 3.14% year-on-year.

Entering the third quarter of 2020, the government began to loosen the lockdown regulations, and the economy started to increase. Despite the negative growth still, the contraction in the third quarter of 2020 was not as deep as the second quarter. Businesses began to grow again and tried to walk in a new normal. This situation that is forced to normalize has resulted in an increase of economic growth on a quarter-to-quarter basis (q-to-q), which is 5.05%.

In the fourth quarter of 2020, Indonesia was declared to be entering the brink of recession. It is caused by the negative economic growth experienced by Indonesia for two consecutive quarters.  The Government has done various efforts in order to restimulate the economy with programs through monetary and fiscal policy.

Flashback to the Indonesian economy in 2020 provides many evaluations for the Government in regulating the economy. Year 2021 is the time for the Government to focus on restructuring the economy. The Government must work extra-hard with extra-programs as well to be able to recover the economy. These efforts are done by improving the fiscal policy to increase state revenue. The Government’s actions will not run smoothly without any supports from the public. Let’s support the Government’s efforts by paying taxes obediently to accelerate the wheels of Indonesia’s economic growth.