Jakarta, CNN Indonesia –
President Joko Widodo (Jokowi) gives a signal that the purchasing power of the Indonesian people is stuck, aka reaching the maximum point for consumption due to the pressure from the pandemic corona virus or covid-19. This is reflected in the realization of revenue tax which the state managed to collect up to last July.
“This is information to all of you, the tax revenue in July will start stuck again, not like this (demonstrating an ascending curve) but like this again (a straight curve). This shows that people’s purchasing power is stuck again, “said Jokowi, Monday (24/8).
Meanwhile, data from the Ministry of Finance shows that the realization of new tax revenues reached Rp. 711 trillion or 50.62 percent of the target of Rp1,404.5 trillion as of July 2020. When compared to July 2019 which had reached Rp. 810.7 trillion, the revenue was minus 12, 29 percent.
Meanwhile, the tax revenue only reached Rp. 608.1 trillion per month ago. Realization contracted 14.7 percent from IDR 705.6 trillion in the same period the previous year.
Finance Minister Sri Mulyani Indrawati said Value Added Tax (PPN) revenue contracted 12 percent. Likewise with income tax (PPh).
“We do feel that the pressure on tax revenue is extremely hard, especially for PPh 21 after July. There are many who have experienced pressure as well as VAT,” Sri Mulyani explained.
Indonesian Center of Reform on Economics (CORE) economist Yusuf Rendy Manilet said Jokowi’s signal of stuck purchasing power is actually a sign that the domestic economy will experience a recession in the third quarter of this year. A recession is a condition when a country experiences negative growth in two consecutive quarters.
Currently, Indonesia has once swallowed negative economic growth, namely minus 5.32 percent in the second quarter of 2020. Yusuf said now Jokowi seems to want to signal that a recession will be experienced by Indonesia, given through a statement of stuck purchasing power.
Moreover, Sri Mulyani’s tax revenue data also confirms the depth of contraction in the state income account. This indicates the minimum consumption of both the public and the business world.
“The signs (of a recession) are already visible. There is a chance for growth (in the third quarter) not too far from the minus 5.32 percent in the second quarter,” Yusuf told CNNIndonesia.com, Monday (24/8).
He explained that this signal of stuck people’s purchasing power is very likely to lead to a recession because Indonesia is a country with an economic structure that depends on household consumption. To spur consumption, of course, people must have a good level of purchasing power.
But in fact, economic pressure in the midst of the corona virus pandemic or covid-19 has caused many people to have reduced income, especially small business actors in informal work such as street vendors to other daily jobs.
In fact, not a few of them lost their jobs, either because of layoffs or being laid off. The latest data from the Ministry of Manpower recorded that there were 2.1 million workers who lost their jobs during the corona pandemic.
On the other hand, he continued, the level of people’s purchasing power was not sufficiently maintained due to the provision of stimulus from the government. The realization of the budget for handling the impact of the Covid-19 pandemic and the government’s National Economic Recovery (PEN) program has been running slowly.
It was recorded that the realization had only reached IDR 174.79 trillion as of August 19, 2020. This amount is equivalent to 25.1 percent of the total budget ceiling of IDR 695.2 trillion.
“Ideally, if the September target is 100 percent, at least in August it should be 30-50 percent, but this is still below. Various efforts have been made, including the form of a Task Force, but in fact there has been no impact,” he said.
Meanwhile, growth from other indicators, such as exports and investment, was also minimal for the national economy. From exports, Indonesia’s trade balance indeed recorded a surplus of US $ 3.26 billion in July 2020.
This indicates that the value of exports is much higher than imports. However, what actually happened was not merely that there were high export opportunities in the midst of a pandemic.
However, this condition occurred because imports fell sharply due to low domestic demand.
It was recorded that Indonesia’s exports were US $ 90.12 billion in January-July 2020, down 6.21 percent from US $ 96 billion in January-July 2019. Meanwhile, the import realization was US $ 81.37 billion or contracted 17.17 percent from US $ 98 billion in the period the same one.
Meanwhile, investment was recorded at around Rp. 402.6 trillion in the first semester of 2020. The amount reached 49.3 percent of the revised investment target to Rp. 817.2 trillion this year.
“So even though there is an opportunity to improve in the third quarter, the chances are marginal, a little thin, the possibility of negative growth is not as deep as before,” he said.
Yusuf also projects that Indonesia’s economic growth will be minus 2 percent to minus 4 percent in the third quarter of 2020. From this condition, Yusuf said that the government must work harder to accelerate the realization of the budget for handling the impact of the Covid-19 pandemic and PEN.
The goal is so that people’s purchasing power does not fall deeper. In addition, we must find ways to keep exports and investment excited amidst the economic pressures that hit all countries in the world.
Likewise, Economist and Executive Director of the Institute for Development of Economics and Finance (Indef) Tauhid Ahmad also saw the signs of a recession getting clearer. The projection is that the national economy will contract by minus 1.3 percent to minus 1.7 percent in July-September 2020.
“Because it has been more than six months since the pandemic has not been completed and the realization of PEN is low, it automatically enters a recession,” said Tauhid.
Tauhid said that if you want the Indonesian economy to be at least positive even at zero percent, then the realization of the budget for handling the impact of Covid-19 and PEN must be at least 50 percent by the end of September 2020. Unfortunately, even though Jokowi has formed a Task Force for Handling Covid-19 and PEN in the last month, however, budget realization is still around 25 percent in August 2020.
“Previously the scenario was that (the realization of PEN) was above 50 percent, it could be positive in the third quarter, but because it is low, especially since the pandemic has worsened, who would dare to do economic activity?” he said.
Furthermore, he said the main signal of Indonesia’s recession in the third quarter of 2020 could also be further validated by the announcement of the August inflation rate on September 1. If inflation is low or even deflationary again, then a recession will be even more unavoidable.
“Even if there is deflation again, it is clear that the purchasing power will not move. Low inflation is below the average, this is a sign of a recess period, so the indicator before a recession is inflation,” he explained.
In fact, Tauhid is worried that Indonesia’s economic contraction will also be swallowed up until the fourth quarter of 2020. “With the pandemic situation that is still high, the budget is low, yes in the fourth quarter it is rather difficult to move to be positive, even though there are improvements, but it will not be like the fourth quarter of 2019, “he concluded.