1 - Introduction: The Impact of COVID-19 in Indonesia

Summary

Beginning in December 2019 the novel coronavirus swept quickly through all regions of the world. COVID-19 has wreaked social, political and economic havoc everywhere and has shown few signs of entirely abating. The recent development and approval of new vaccines against the virus, however, now provides at least some reasonable hope that we may be coming to the beginning of the end of the pandemic. This volume collects papers from a conference organised by the Australian National University's Indonesia Project titled Economic Dimensions of COVID-19 in Indonesia: Responding to the Crisis, which was held 7–10 September 2020. It constitutes the first thorough analysis of the impact of the pandemic in Indonesia and government's initial response to its deleterious effects.

Collectively, the chapters in this volume focus for the most part on the economic and socioeconomic elements of COVID-19 in Indonesia. After the overview, the remaining chapters can be usefully organised according to three broad topics: monetary and fiscal affairs; trade, labour and poverty; and health, human capital and gender. We begin this introductory chapter by summarising the main points of each chapter. We conclude with a brief discussion of Indonesia's path ahead.

Overview

Hal Hill emphasises that the pandemic represents one of the most serious challenges faced by Indonesia in its 75-year history as a nation. While the country's health system has struggled to respond successfully, macroeconomic policy has been reasonably adept. COVID-19's impact on poverty and unemployment has been generally significant but varied in its severity across Indonesia's vast geography. Overall—thanks to good luck and effective management—negative economic effects have been restrained, at least as compared to those of other countries in the region. Hill argues it is unlikely that the crisis will force the Widodo administration to change its general policy direction in any fundamental way.

Monetary and fiscal affairs

Stephen Grenville and Roland Rajah discuss the two main tasks for monetary policy in the context of the ongoing pandemic: to mitigate short-term portfolio outflows and to help finance the budget deficit. The authors demonstrate that financial outflows, which rose considerably at the beginning of the crisis, quickly stabilised thanks to government intervention in the currency and bond markets.