4 - The Indonesian Rice Economy during the COVID-19 Pandemic

Summary

INTRODUCTION

The COVID-19 pandemic caused an economic recession in Indonesia where growth contracted for four consecutive quarters. In 2020, the contraction was recorded at 2.07 per cent. Meanwhile, as of early 2022, the pandemic had infected an estimated 6 million people or more. More than 150,000 or 2.7 per cent of those infected have died. This death rate is slightly higher than the global average of 2.2 per cent. The pandemic caused by the severe acute respiratory syndrome coronavirus 2 (SARSCoV- 2) has crippled the Indonesian and global economies, reducing business interactions among residents due to the rapid infectiousness of the virus. The subsequent variant Delta hit Indonesia harder, spreading more quickly and deadlier.

In 2021, the Indonesian economy grew at 3.69 per cent (year-on-year), which was below the official forecast of 4.62 per cent. The agricultural sector, however, grew by 1.84 per cent, in part cushioning the COVID-19 recession. As a result, by September 2021, the country's poverty rate dipped to 9.71 per cent, or down by 26.50 million people. The majority of the poor live in rural areas, numbering 14.64 million or 12.53 per cent of the total population. They include farmers, smallholders, landless farmers and farm labourers who are disproportionately vulnerable to exogenous, economic shocks such as the COVID-19 pandemic. The pandemic also increased the unemployment rate to 7.07 per cent of total labour in August 2020, up from 5.23 per cent a year earlier. More specifically, the unemployment rate was 2.56 million or 14.28 per cent among the working-age population in 2020, based on workers who stopped working due to the pandemic since February 2020. Fortunately, total unemployment decreased to 6.49 per cent in August 2021 as the economy began showing signs of recovery.

Moreover, the pandemic has caused a “ruralization phenomenon” in the Indonesian economy, similar to what happened during the Asian Financial Crisis in 1997 and 1998. A significant number of urban labourers returned to rural areas to work in the agricultural sector when the urban-based industry and service sectors collapsed. Before the pandemic, in August 2019, the agricultural labour force was 35.45 million or 27.53 per cent of the total 128.76 million labour force.