By Ranessa Nainggolan
The Covid-19 global pandemic has been with us for more than a year. Now the mutated version of the Coronavirus has spread in several countries, such as Japan, England, and India.
India is one of the countries most affected by Covid-19. India continues to break global records for its daily cases. Within three days, there were nearly one million positive cases in India with daily cases reaching more than 300,000.
Hospitals are overflowing with patients and oxygen supplies are scarce. Families are having difficulties cremating their dead, so the government finally decided to carry out mass cremations.
Indonesia is observing the pandemic situation in India with much concern. However, on 23 April, as many as 135 people arrived at the Soekarno-Hatta International Airport from India on chartered planes. Twelve of them were confirmed positive for Covid-19.
Responding to this incident, on April 25, the government temporarily banned Indian citizens from entering Indonesian territory. This policy was put in place due to the high spike in Covid-19 cases in India.
The incident has raised questions like: Is Indonesia heading towards a situation like India’s? If so, how will that impact on the government of President Joko Widodo (Jokowi)?
Following in India’s Footsteps?
Jack Colwil in his article Why The Government Makes The Same Mistake? Cites several factors why the Covid-19 pandemic is difficult to contain in some countries. These include policies that are not science-based, and vaccine euphoria, which causes people to disregard health protocols.
Colwil describes what happened in India. Last February, India was praised by the global community for its success in reducing the number of Covid-19 cases and for a decline in the need for ventilators. In addition, the Indian government has carried out a lockdown in several regions in India and succeeded in carrying out a mass vaccine rollout.
India’s “success” in dealing with the pandemic at the beginning of the year resulted in the public becoming complacent about the health protocol. Religious festivals and politicians’ campaigns brought together huge crowds, resulting in a spike in cases and a general worsening of the pandemic situation.
Observers have expressed concern that Indonesia could experience a crisis similar to what happened in India, or an even more severe debacle. Vaccine euphoria in Indonesia has also resulted in people starting to ignore the health protocol, because they assume they are immune to the virus after being vaccinated.
The Ministry of Health (Kemenkes) has repeatedly announced that vaccines do not guarantee against the possibility of Covid-19 infection. This complacent attitude towards the health protocol is said to have made cases increase so that the spread of the virus from office clusters is now taking place once again in Jakarta.
In addition, Indonesia’s pandemic control techniques are not as good as India’s. The Jokowi administration chose not to implement a lockdown like the one imposed in India. Moreover, Indonesia does not have a mainstay vaccine, in contrast to India, which already has AstraZeneca.
Regarding this year’s Eid homecoming, the Covid-19 Task Force said there would be 18.9 million people desperate to go home during the pandemic. This could have implications for an increase in cases after Eid, just like what happened during the long New Year holidays earlier this year.
Hence, it is anticipated that Indonesia could experience the kind of crisis that is now afflicting India, especially if the mutated version of Covid-19 has spread in Indonesia. In that case, will the Indonesian economy be severely impacted as has happened in India?
Fragile Five Trauma Returns?
David Weil’s article entitled Health and Economic Growth argues that health problems correlate with economic conditions. A country with a strong economy will create a healthy environment. Developing countries find it more difficult to achieve this than developed countries because of limited funds to create a healthy environment.
Developing countries with large populations will probably experience fast and widespread disease transmission in their communities—with a severe impact on the economy. On the other hand, a healthy population can maintain worker productivity, which will strengthen the economy.
Weil’s writing explains the impact of the pandemic on the Indonesian economy under Jokowi’s administration. The high number of people infected with Covid-19 disrupts economic productivity. As a result, Indonesia suffered economic losses totaling IDR 1,356 trillion in 2020.
One sign that Indonesia is desperate with its economy is the statement of Minister of Finance (Menkeu) Sri Mulyani that she hopes that the International Monetary Fund (IMF) and the World Bank (WB) will help Indonesia manage its debt.
As a result of the pandemic, Indonesia’s foreign debt rose to IDR 6,445 trillion. Indonesia’s foreign debt under the Jokowi administration is higher than those under previous leadership.
This situation has wider implications considering that Indonesia is one of the emerging countries that are expected to have a strong impact on the global economy in the future. Emerging countries are countries that have characteristics similar to those of developed countries, but do not yet fully meet the standards of developed countries.
As part of the developing world, Indonesia’s economic condition itself is vulnerable to the global situation. This can be explained by Morgan Stanley’s concept of The Fragile Five.
Stanley stated that five countries are included in The Fragile Five, namely Brazil, Indonesia, South Africa, Turkey, and India. These five countries have good economic growth prospects but their economies are vulnerable.
The five countries were the countries affected by the taper tantrum in 2013. In that year, the Federal Reserve (The Fed) of the United States (US) announced plans to reduce the rate of purchasing of Treasury bonds. This was applied to the US economic recovery through an asset purchase program and an increase in interest rates.
Although the policy was not implemented, this has destabilized the exchange rates of several developing countries and resulted in financial market instability. In response to the announcement, bond yields increased. The reaction and effect of the announcement are called taper tantrums.
In the light of the taper tantrums, will Indonesia experience a similar debacle as it did in 2013? India is similarly at risk, as it endures a wave of Covid-19 mutations that have an impact on the Indian economy.
Last March, bond yields surged, while the stock market fell seven percent in a week. So there are concerns among developing countries that were affected by the taper tantrum.
Stanley believes that current conditions are different from those of 2013. United States bonds have stopped increasing and remain below 1.6 percent. Stanley also believes that there is a tendency for central banks not to increase interest rates. Bonds can be a solution when economic growth is sluggish and the central bank is sluggish.
As a result of Covid-19, imports decreased so that the current account deficit (CAD) of emerging states was eroded. In Indonesia alone, the CAD to GDP ratio in 2020 fell 0.46 percent. This is different from 2013, when the ratio stood at 3.16 percent.
However, it is still premature to assume that these problems will recur. The 2013 taper tantrum began with the withdrawal of fiscal stimulus. This is what triggers the phenomenon: the FED reducing stimulus by reducing asset purchases. However, in the current situation, the US economy itself has not recovered.
Even so, the Jokowi administration should be prepared if taper tantrums occur again. In addition, the government should also be more aggressive in dealing with a pandemic to prevent further damage to the Indonesian economy.
Editor’s note: The views expressed in this article are the author’s and do not necessarily reflect the views of PinterPolitik.