Loose Social Distancing Points to Slow Indonesian Recovery
(Bloomberg) -- Indonesia opted for less punishing social-distancing measures than its neighbors to stem the spread of the coronavirus. Now analysts are warning its economy will take much longer to recover than others in Southeast Asia.
With the pandemic’s peak expected in late May, President Joko Widodo is recalibrating his strategy of large-scale social distancing rules and calling for a ramp-up of testing to contain the impact of the virus in Indonesia, which has suffered the highest death toll in Asia after China and India. While additional cities are opting for partial lockdowns, more than two-thirds of the country’s 270 million people remain under only voluntary isolation, and infections have spread to more than 260 cities across the archipelago.
The president’s approach to the crisis stands in sharp contrast to the nationwide lockdowns in countries like India and Malaysia, which are now set to relax some curbs even after extending their initial closures. Indonesian officials estimate the disease will infect about 95,000 people before it eases. Jokowi, as Widodo is known, may need to add to the $28 billion in economic stimulus the government has promised.
“The Indonesian government’s response to Covid-19 has been slow, unclear and fractured,” Fitch Solutions said in a report. “Given the late containment efforts in Indonesia, we believe that the Covid-19 outbreak will likely last longer compared to other countries in the region. As such, containment measures and border closures will also remain in place for longer.”
Jokowi has rejected calls for a complete lockdown, citing the impact on jobs and businesses. But he’s pushing for stricter social distancing and this week banned an annual ritual of millions of Muslims traveling to hometowns and villages ahead of the Eid al-Fitr festival. He held back on the ban until the government rolled out billions of dollars in food and social assistance programs to shield millions left jobless.
Jokowi has denied charges of being slow to respond to the pandemic, saying his administration started preparing as early as January but was hamstrung by “brutal competition” among nations to secure the supply of test kits and other medical equipments.
A failure to conduct mass testing early enough means as many as 60,000 people may need treatment by the end of May, according to Pandu Riono, an epidemiologist at the University of Indonesia. Friday’s tally of 436 new confirmed cases, the largest in a single day despite a month of social-distancing steps, brought the country’s total to more than 8,200 infected and 689 dead.
“Our estimate right now is that 86% of the infections out there are asymptomatic,” Riono said. By adopting a stricter social-distancing policy nationally, the government can contain the number of people needing medical attention to about 12,000 at the outbreak’s peak, he said.
Concerns are mounting about the cost of protecting the economy. While countries like South Korea and Taiwan have managed to rein in the pandemic while minimizing disruptions to mobility, others like Japan and Singapore that initially shunned strict social-distancing rules have had to tighten measures.
Singapore, a country experienced in handling epidemics, showed it’s possible to be wrong-footed by the virus. It now has Southeast Asia’s largest recorded outbreak and is racing to regain control, with most new cases centered in crowded dormitories that house more than 200,000 foreign workers.
Indonesian authorities extended the partial lockdown in Jakarta for another month, saying the measures haven’t yet had the desired effect. Governor Anies Baswedan threatened Wednesday to slap hefty penalties on violators after authorities filed cases against more than 30 companies for failing to comply with work-from-home orders.
The government imposed a nationwide ban on airlines and chartered or private passenger planes starting Friday, and is restricting land and sea transport to take people to and from infected areas at the beginning of the month-long Muslim festival, when millions of people normally travel to celebrate the Eid al-Fitr.
The lax enforcement of mobility rules, which bans gatherings of more than five people but allows travel, may point to a longer recovery trajectory for Indonesia, according to Jeffrosenberg Tan, head of investment strategy at PT Sinarmas Sekuritas in Jakarta.
“Looking how things are going under the stricter social-distancing measures, there’s a risk that Indonesia may not reach the peak of the outbreak by May. It could be beyond June,” Tan said. “It could potentially prolong the lockdown, and that would be very destructive for the economy and business conditions.”
Already, the outbreak is weakening the outlook for Southeast Asia’s only $1 trillion economy. The government may need to expand fiscal stimulus to 1,600 trillion rupiah ($104 billion), or about 10% of gross domestic product, to cushion the economic shock, the nation’s top business lobby group said.
Finance Minister Sri Mulyani Indrawati has warned the economy could contract 0.4% in a worst-case scenario, and the government has suspended a budget-deficit cap to allow itself to boost spending. The budget risks last week prompted S&P Global Ratings to downgrade Indonesia’s outlook to negative from stable.
“While the government and the central bank have made aggressive moves to stimulate the economy, we believe that these efforts will not be enough to offset the devastating effects the Covid-19 pandemic will have on employment and public health in Indonesia,” Fitch Solutions said.
©2020 Bloomberg L.P.