How Did The Indonesian Economy Develop During a Recession?

How has the Indonesian economy fared during the recession?

A recession occurs when a country's economic conditions deteriorate. This is reflected in negative gross domestic product (GDP), rising unemployment and two consecutive quarters of negative real economic growth. A recession occurs when economic activity stagnates and experiences a significant contraction over months or years. This situation is affecting people's lives. In general, a recession occurs when a country's economy experiences negative growth for two consecutive quarters. As we all know, 2020 has brought the world into recession due to the Covid-19 pandemic. This has led to staff reductions and many employees have been laid off.

Here are some reasons for the recession reported by various sources
First,In 2020, the world experienced a recession due to Covid-19, but now an economic recession is likely due to high inflation rates due to rising prices of many energy commodities.

Second,Economic shocks, such as when the world was hit by the COVID-19 pandemic, are one of the causes of economic recession. This is shown by people's weak purchasing power due to financial difficulties.

Third, Deflation causes not only inflation but also recession. Deflation is characterized by falling prices of goods and services. Deflation can seemingly increase people's purchasing power, but when it becomes excessive, it hurts providers of services and goods.

Fourth,Import and export conditions affect a country's economic growth. If imports outstrip exports, it could be a sign of a recession. If a country brings in more demand from abroad, it risks running a budget deficit. If that happens, national income will fall and there is a possibility of falling into recession.

Last,The cause of the recession lies not only in the immediate economic sphere, but also in technology. With the existence of the industrial revolution, there are concerns that many human jobs will be replaced by artificial intelligence (AI) and robots. In that case, many workers could lose their jobs and a recession is inevitable.

Recession characteristics

Declining Job Opportunities Declining job opportunities have led to rising unemployment, indicating weak economic growth in the country. When this happens, the crime rate is high. Rising government crime could cause investors to lose confidence in their investments and ultimately plunge the country into recession.

Negative Economic Growth Negative economic growth for up to two consecutive quarters in a country can trigger a recession. This state generally arises because it is subject to volatility from investment, national income, consumption, expenditure to imports and exports. If this continues over the long term, it will be difficult to avoid a recession.

Impact of economic recession on Indonesia and the world

Impact on business Businesses may go bankrupt during a recession. In a recession, people have less purchasing power and business profits fall. This condition jeopardizes the smooth flow of money. Price wars then became the company's option to avoid bankruptcy. However, this move wastes profits and should be efficiently patched.

Impact on Workers Closing unprofitable businesses and cutting operating costs means laying off many workers. More layoffs mean more unemployed people. In fact, in the midst of an economic downturn, they must continue to meet their living needs.

Government Impact The recession has reduced government tax and other revenues. This is because a person's income will decrease until house prices fall, ultimately reducing his VAT going into the State Treasury. Declining government revenues increase the number of unemployed, so governments need to open up as many employment opportunities as possible. As a result, lending to foreign banks will also increase.

The impact of the recession on the Indonesian government

Most notable is the increase in unemployment. Governments must quickly find a solution to end the recession in order to create jobs again to absorb workers.

In addition, government lending will also surge as governments need sufficient money to finance the various needs associated with their country's development efforts.

The government's tax and non-tax revenue sources are also very small. During a recession, as workers earn less, the government receives lower income taxes, and property prices fall, resulting in less tax revenue from property sales and less public spending. Low and low. This also has an impact on lower sales tax revenues as they tend to be lower. Moreover, development is still needed in various areas of government, including ensuring the welfare of the people. This results in government spending in the form of payments for the welfare of the people, such as allowances, benefits and subsidies. Declining tax revenues and increasing social security have led to an increase in budget deficits and public debt

How to prevent economic recession in Indonesia and the world

Once we understand the impact, we need to know how to prevent a recession. Because a recession is a scary situation for many sectors. How to avoid a recession:

The way to avoid a recession is to strengthen purchasing power through massive spending. The government is planning massive spending to combat the looming recession to boost domestic demand and spur business investment.

In addition to strengthening purchasing power, the recession can be overcome by implementing measures and strategic projects to create an investment climate so that investors are interested in reinvesting their capital.

MSME is one of the sectors affected by the recession. However, because of their smaller size, this type of company is more resilient than large companies in the event of a crisis. Therefore, financial support is required to sustain production activities.

What to do when Indonesia is in recession, if Indonesia is in recession?

In fact, Indonesia is on the list of 15 countries at risk of recession. However, according to Bloomberg research, Indonesia faces a relatively low recession risk of just 3%. So how do you manage your personal finances to withstand the shock of a recession? 

Here's what you can do

don't waste

Reset expense items

Debt exemption

Start setting up your emergency fund

Insurance preparation

Increase your income

Investments and savings

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