COVID 19 and Indonesia’s Economy: The Impact

The Corona virus (COVID-19) has caused worldwide upheaval. The virus originating from Wuhan, China has symptoms similar to flu, and the cure has not been found until now. As the number of infected people increases, and the number of deaths goes up, more and more people are carrying food and groceries from the nearest supermarket and locking themselves in the house.

Just last week, Indonesia got the first patient infected with the Corona virus. Previously, Indonesia was one of the countries that had not been affected by this virus, and only a matter of time before this virus arrived in the coast of our country. When the Minister of Health first announced the presence of patients who were positively identified with the Corona virus, many people immediately flocked to the nearest supermarket and bought instant noodles and hand sanitizers. In addition, the capital market was immediately shaken because many people began to be afraid to invest, followed by world oil prices that became volatile. This time, ValueQ Indonesia discusses briefly the effects of this virus on the Indonesian economy, both in the short and long term.

  • Prices of groceries and merchandise go up

Surely many readers have anticipated this virus and have been supplying soap and hand sanitizers at home, not to mention cutting rice and food to be stored for months. In many e-commerce stores too, the price of masks and hand sanitizers soared to prices that reach 50 or even 100,000 rupiah. Indonesian President Jokowi has appealed not to panic in buying goods, because it was this panic that made prices soar up.

What Jokowi said was true. At times like this, panic buying things is not profitable for everyone. Items such as masks are very important for doctors, nurses, and people who are at the forefront of caring for sick people infected with the virus. Buying goods such as rice, oil, and also instant noodles does not help, because with the rapidly decreasing supply, the prices of these staples can soar and people who cannot afford cannot buy groceries.

  • Goods imported from China become delayed or blocked

China is indeed known as a major center of trade and industry. Thanks to low labor costs and technological advances that are far more rapid than Indonesia, it’s no wonder that many giant companies are building and focusing factories in this country. Like Apple, which produces almost all of their products here.

Thanks to the Corona virus, the Chinese government has tightened industrial work from raw materials to car manufacturing. As a result, many factories from China temporarily shut down production. This closure means the stock of goods which are usually produced and distributed in bulk will experience a cessation.

One of the companies affected was Under Armor, a company that stood in the field of sports clothing and shoes. Representatives from this company said that there was a difficulty in supplying their clothing materials because their clothing factories were centered in China, and the textile industry was also affected there. The corona virus also cannot help in the global car production supply chain, because most car raw materials are centered in China.

Fortunately, car production and Indonesian manufacturing were not affected because the raw materials used did not come from China. The supply prepared is adequate for the waves that will come. The industries that are really affected are pharmaceuticals and medicines, because Indonesia still relies on China in importing and producing drugs.

But even on a small scale, some direct impacts can already be seen. Because, there are still many medium businesses that depend on merchandise imported from various places, both from Thai clothes to Chinese toys. With the cessation of factory production and also the disrupted shipping process as a preventive measure for the wider spread of the Corona virus, these businesses also get less supply of goods which directly impacts their business continuity.

Reporting from various consultancy agencies, it is reported that factories will be able to resume production in the early second quarter of 2020 when the virus has begun to subside. Hopefully this will happen quickly and the impact of labor will not last long.

  • Tourism and travel industries are affected

Many countries have appealed not to travel abroad if it is not absolutely necessary. Even if necessary, it is strongly advised not to travel to countries that are very vulnerable to the Corona virus, especially China and surrounding countries. And, even without a government ban, the tourism and travel industries have plummeted. The price of aircraft offered to many foreign countries dropped dramatically. For example, flights to South Korea are only 900 thousand, where the normal price can reach millions. But the risk must be borne by itself, because South Korea is one country that is at high risk due to viruses. Many flights have also been canceled, whether flights from countries that have Corona virus patients or not.

This certainly has a direct impact on Indonesia. One of the sectors that Indonesia is most proud of is the tourism sector, especially in areas such as Bali and Batam which are full of foreign tourists. Since the spread of the Corona virus began to spread, it appears that lodging in the Bali area began to be empty of visitors. Favorite tourist locations are also not as crowded as usual. Of course this has a direct impact on the surrounding business entrepreneurs who depend on the number of tourists visiting the area, and also the government that can collect taxes from the tourism sector.

Domestic flights still look normal, but in the future there are expectations to go down if the virus continues to spread to remote parts of Indonesia.

  • Slowing economic growth

Just a few weeks from the emergence of the Corona virus, the world capital markets were immediately shaken, and Indonesia was no exception. JCI had been vacillating for a while back. This is due to the uncertainty and fear of investors regarding what will be done by various parties regarding the handling of this Corona virus. Of course, investment for domestic companies is an indicator of the level of economic health in the country.

Not only that, from the explanation of several points above, it can also be seen that the spread of the Corona virus will directly cause economic activ3ity to slow down, both in terms of production and consumption. Many workers are forced to temporarily stop their work, many businesses have to lose money temporarily, and as a result, the lower the ability of the community to spend money and buy goods or services. This can lead to stagnant economic growth over the next year. If this economic activity continues to slow down, it is feared that it will cause inflation to increase as well.