Indonesia Pushes to Reopen Economy to Curb Mounting Job Losses

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Indonesia is pushing ahead to reopen its economy amid a surge in coronavirus infections, with the government seeking to minimize job losses and the threat of social unrest.

Southeast Asia's biggest economy will need to adjust and cope with the pandemic, which has already put 2 million people out of work in just two months, Coordinating Minister for Economic Affairs Airlangga Hartarto said.

“Whether we like it or not, we have to live with it,” he said in a May 29 interview. “We have to manage it. We cannot stay at home until next year. There will be more people hungry and they will become angry.”

Indonesia is starting to ease lockdown restrictions in areas where infection rates are under control, allowing malls and restaurants to reopen and permitting religious gatherings to take place. The nation of 265 million people, the fourth most-populous country in the world, saw new coronavirus cases double in May and has the highest fatalities in Southeast Asia.

“Nobody is saying it's mission accomplished,” Hartarto said. “We have to live with diseases. We have to adjust and adapt” as long as there's no vaccine, he said.

Hartarto said Indonesia's economy likely contracted less than 3% in the second quarter, and that the government is willing to widen its fiscal deficit further to help cushion the blow from the pandemic. He's sticking to the official forecast of 2.3% economic growth for the year.

Read: Indonesia Starts Year With Weakest Economic Growth Since 2001

The government has set aside about 642 trillion rupiah ($44 billion) so far as part of its emergency virus response, with the budget deficit expected to widen to at least 6.3%. Authorities are now preparing additional stimulus, including 9.4 trillion rupiah for the farming and fisheries sectors, which may be announced in coming days, Hartarto said.

“We will provide the necessary financial support when it is required,” he said.

Hartarto estimated some 9 million Indonesians already were out of work when the virus hit, and another 2 million have been made jobless since. Rising unemployment could cause a crisis in the financial sector, which may have further adverse consequences, he said.

“There will be social unrest as well, and that's what we would like to prevent,” he said.

He said Indonesia's economy is in a stronger position to cope with crises than in past slumps, like in 1998 and 2008. During the Asian financial crisis more than two decades ago, Indonesia's financial sector was in “deep trouble,” while its capital markets got hit in the global financial crisis.

“In 2020, our banking system is quite solid and our corporate sector is more sound,” he said. “The ones that are getting hit are the small and medium enterprises.”