By Eko B. Supriyanto, Chairman of Infobank Institute
“THEN which of the favors of your Lord would you deny?”
Jakarta – Who said Indonesia would enter the abyss of crisis, and go bankrupt. Also, who predicts that Indonesia will enter a crisis situation. Indonesia is actually estimated to be one of the countries that will not enter the aisle of the crisis like in 1998. Because Indonesia is a country that is loved by God.
The Indonesian economy from year to year is always helped by God by increasing commodity prices. Without this natural wealth – with “windfall” sustenance from God – Indonesia is actually not that great. So, Indonesia has more luck than other countries, such as Sri Lanka.
It’s been about a month, television screens, cellphone screens, social media, and the WA groups have been talking about the case of General (Irjen) Sambo complete with “seasoning”. Also, watch the leaders of political parties – those sitting in government, who are busy talking about coalitions, busy talking about presidential candidates. Not to forget, the ministers – from political parties – are busier with the ceremony. After all, the Indonesian economy is running on its own to find its “destiny”.
President Joko Widodo (Jokowi) in his State Speech on August 16, 2022, emphasized that we should be grateful that Indonesia is a country that is able to face this global crisis. Indonesia is one of the countries that has successfully controlled the COVID-19 pandemic.
Including the top five countries with the most vaccinations in the world, which is 432 million doses of vaccine that we have injected. Inflation was also successfully controlled in the range of 4.9%. This figure is far below the Asian inflation average, which is around 7%, and far below the inflation of developed countries, which is around 9%. Even by mid-2022, the APBN also has a surplus of Rp. 106 trillion,” he said.
The President emphasized that the Indonesian economy managed to grow positively at 5.44% in the second quarter of 2022. Meanwhile, the trade balance was in surplus for 27 consecutive months, and in the first semester of 2022, the surplus was around Rp 364 trillion.
According to the Infobank Institute, there are three big things that keep the Indonesian economy growing. One, the Indonesian economy can continue to grow because of the intervention of the State Budget in the form of the intervention of the National Economic Recovery fund which for three years has reached Rp1,895 trillion.
Two, the Indonesian economy is not directly related to world trade. This means that the economic structure is not dominated by exports. More on state spending and public consumption. Three, God loves Indonesia, in the form of the blessing of rising commodity prices. This abundant natural resource given by God has saved Indonesia’s current economy.
Even though God loves you, you should Stay Mindful and Vigilant.
The relatively stable economic growth during the COVID-19 pandemic is certainly a gift on this 77th Indonesian Independence Day. Indonesia should be grateful, considering that many countries in the world are predicted to have the same fate as Sri Lanka – bankruptcy. Not being able to provide energy for domestic needs is one of the factors that make Sri Lanka a bankrupt country. The economic crisis eventually became a political crisis.
What happened to Sri Lanka can certainly be a lesson for other countries, including Indonesia. Although Indonesia is loved by God, vigilance must be maintained. It does not mean that we are saying that the Cabinet of Indonesia Maju is not working. They work hard – visit here and there, to keep the economy growing. However, it must be admitted that not all ministers are able to make policies that can be implemented well and can encourage economic growth.
The Ministry of Finance, the Ministry of Health, the State Ministry for State Owned Enterprises, The Coordinating Ministry for Maritime and Investment Affairs (especially regarding the procurement of vaccines), the Ministry of Village, Development of Disadvantaged Regions and Transmigration (village funds and direct cash aid), the Ministry of Public Works and Housing with its infrastructure projects, as well as the Ministry of Cooperatives and Small & Medium Enterprises with Micro Business Productive Assistance and its People’s Business Credit interest subsidy, and of course the Governor of Bank Indonesia (with burden sharing) at least has a role in keeping the Indonesian economy from falling apart.
Also, the role of community organizations, such as Nahdlatul Ulama (NU) and Muhammadiyah, should not be ruled out, which contribute to the acceleration of public health and education. The two largest Islamic organizations have played an important role in promoting health recovery through a network of hospitals and education. In addition, during 2022 there will be no demonstrations that are disruptive to economic activity.
Once again, the Indonesian economy in 2022 is actually more due to the luck factor. Unlike Singapore and Australia, which are strongly linked to the global market. This means that the Indonesian economy does not depend on exports. Indonesia’s economic growth depends more on state spending and public consumption.
So, even if the global economy weakens, it will not have a major impact on the Indonesian economy. On the other hand, if the global economy grows, the Indonesian economy will grow more slowly. This happened in the 2009/2010 financial crisis – where we were not severely affected. Meanwhile, Singapore was more severely affected.
However, it must also be acknowledged that the Indonesian economy is driven by the “intervention” of the State Budget. The National Economy Recovery fund is “doping” for the economy. According to records for three years (2020-2022), the amount of National Economy Recovery funds is above Rp 1,895 trillion. This is the biggest economic “lubricant”.
Honestly, without the “Hand of God” the State Budget in Adam Smith’s Theory is also difficult to restore people’s purchasing power. However – this should also not turn from a market failure to a budget failure. For this reason, state spending must be efficient in the future.
Not wasteful and starting to think again to finance lighthouse infrastructure projects. And, began to slowly reduce the country’s debt, although the debt-to-GDP ratio is still very safe (44%). However, because the interest is among the highest, it is necessary to “stay mindful and vigilant (eling lan waspodo)”. Ideally, the results of the commodity windfall are to reduce the state debt which figure has already passed Rp. 7,000 trillion.
Although the debt ratio is safe, the interest expense must be a concern. Because the interest on the debt has been paid with a new debt in the form of the issuance of Government Securities. To reduce the burden and risk, it is better if the results of the windfall are to reduce the state debt.
History always repeats itself. As long as commodity prices rise, the Indonesian economy is difficult to collapse. That’s what separates Indonesia from Sri Lanka. Indonesia, although the burden of subsidies and compensation for fuel oil is Rp 502 trillion, the proceeds from taxes and royalties on commodities and minerals can more or less cover subsidies and compensation. Taxes and royalties from rising commodity prices reached Rp 420 trillion, enough to cover energy subsidies and compensation.
Without taxes and royalties, the state budget will collapse. Imagine. With such a large subsidy, the government will of course print new debt to cover the subsidy. The figure of Rp 502 trillion will continue to swell.
Moreover, in the field, more vehicles “drink” subsidized fuel than non-subsidized ones. For example, a vehicle should “drink” Pertamax, but often it “consumes” subsidized Pertalite that is not intended for it. It’s leaking here. Because of this, the issue of the increase in Pertalite prices has created more panic.
Need to be careful. According to several predictions from a number of institutions, in 2023 there is a danger of a decline in commodities. And, that will be the biggest fear for Indonesia if the price of this commodity suddenly drops. State finances are not strong enough to support the State Budget, there is a large deficit, and the government inevitably raises fuel prices.
Eventually interest rates rise, because inflation will surely flare up. Credit interest rates go up, purchasing power goes down, prices go up, so installments to the bank also drag. Banks will also become “farms” of bad credit. If so, then the banks will find it difficult to disburse credit because the risk of default is high. Credit restructuring was extended. The banks entered into a long consolidation mood.
Therefore, said Mr. Jokowi, “We must always be ‘eling and waspodo’, we must be mindful and vigilant”. Everyone must be mindful and vigilant, including the politicians – the main problem of our economy is not just about the presidential candidates and coalitions. The situation will be dark if commodity prices fall, while world food prices rise, including world energy prices.
That’s more dangerous than just presidential candidate and months of talking about the Sambo case, which is like peeling an onion – to no end. Full of conspiracies, and continues like a telenovela story. The evidence is now that these two factors have no effect on the economy and people’s welfare, although legal matters are also important.
History proves, whoever the president is, the Indonesian economy is still loved by God, always gets a “windfall” in the form of rising commodity prices. Without rising commodity prices, the story would be another. Let’s go through 2022 and 2023 by still working.
May God continue to love Indonesia with rising commodity prices. God willing, as long as commodity prices are still high to support fuel subsidies so that inflation does not soar, it is unlikely that Indonesia will enter into a deep crisis. However, it is better if the “windfall” from this commodity to reduce the debt burden and not to be “burned” in the form of energy compensation subsidies.