Indonesia: COVID-19: Economic and Food Security Implications (3d Edition)

Indonesia: COVID-19: Economic and Food Security Implications (3d Edition) Author/s:
World Food Programme
Date: 1 Oct 2020Publisher:
World Food Programme

Key Messages

  • In the second quarter of 2020, the Indonesian GDP contracted by 5.32% year-on-year (Y-o-Y), the most significant decline since 1999. The GDP dropped by 4.19% compared to the first quarter of 2020.
  • The government expects next year’s budget deficit to amount to IDR 971.2 trillion, 5.5% of GDP, given the need to further boost the economy and provide social and healthcare assistance.
  • Household consumption expenditure, contributing 58% of total GDP, decreased by 5.5% (Y-o-Y). Implementation of large-scale social distancing policies in multiple regions, business closures and movement restrictions are the primary cause of the contraction.
  • The poverty rate in Indonesia increased in March 2020 to 9.78% from 9.41% in September 2019, primarily in urban areas. An additional 1.63 million people fell into poverty, returning the poverty rate close to the September 2018 level (9.82%). The Government predicts the poverty rate to reach around 10.6% in 2020 with an estimated additional 4 million people falling below the poverty line. The World Bank projected the poverty rate to increase to 10.7% (mild scenario) or increase to 11.6% (severe scenario).
  • The annual inflation declined throughout the second quarter into the beginning of the third quarter of 2020, reaching 1.54% in July. This is the lowest annual inflation rate recorded since 2000, a result of the decrease in prices resulted by lower demand and less consumer spending due to the COVID-19 pandemic.
  • An estimated 1.8 million formal and informal workers were directly impacted by the COVID-19 pandemic between April and May 2020, according to data validated by the Ministry of Manpower (MoM). The data of an additional 1.3 million workers are under review by the MoM.
  • BAPPENAS projects the unemployment rate to reach between 8.1% to 9.2% in August 2020, the highest in a decade. According to BAPPENAS, it is estimated that an additional 4 to 5.5 million workers could become unemployed in 2020 as a result of the pandemic.
  • Rising unemployment among formal and informal workers has led reduced purchasing power. A World Bank mobile survey in May 2020 reported that 38% of respondent households consumed less than previously due to lack of financial resources.
  • In response to the pandemic, the Government of Indonesia (GoI) continued supporting the most vulnerable groups through social protection programs. The Government allocated IDR 695 trillion in stimulus spending in 2020 to support the economy and fund the pandemic response.
  • The Ministry of Agriculture has been implementing its subsidized credit scheme program (KUR) to support the agricultural sector, with an amount of IDR 50 trillion.
  • In comparison to the first semester of 2019, Indonesia’s overall trade value shrank by 5.5% for exports and by 14% for imports. Despite the negative value, food trade grew in terms of exports and imports. Supplies for major food items are expected to meet domestic demand until end-September, although imports would be required for selected commodities.
  • Rice production in January to August 2020 remains lower by 23% compared to the same period 2019. Domestic rice production is predicted to maintain a positive balance nationally and able to meet demands without imports until the end of 2020. The Ministry of Agriculture estimates rice harvests in the second semester of 2020 reaching over 13 million tons, with an end stock of over 6 million tons by end of 2020.
  • The limited data availability on the prices and availability of nutritious food such as fruits and vegetables makes assessing population access to these items, both economically and physically challenging.

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