Jokowi’s Economic Reboot Stumbles on Factories Shut by Virus
Jokowi’s Economic Reboot Stumbles on Factories Shut by Outbreaks
(Bloomberg) -- Indonesia’s efforts to revive the economy took a stumble as virus outbreaks forced factories in one of its biggest manufacturing hubs to shut.
South Korea’s LG Electronics Inc., and Japan’s Suzuki Motor Corp. and NOK Corp. were told to stop operating their facilities in Cikarang, West Java, after more than 300 workers at the industrial area tested positive for the new coronavirus.
President Joko Widodo has sought to turn the pandemic into an opportunity to set Indonesia on a path toward becoming a developed country. He pledged to ramp up state spending after the economy fell into its first contraction in more than 20 years. Meanwhile, the new clusters and the rising number of infections may keep offices and factories shut while consumers are opting to stay home.
“The prolonged local outbreak remains a major risk to the recovery, especially because economic centers are still hotspots,” Euben Paracuelles and Rangga Cipta, economists at Nomura Singapore Ltd., wrote in a report. “This will keep household and business cautious even if no lockdown is reinstated.”
Indonesia added more than 3,000 new virus cases for a second day on Saturday, another record, with Southeast Asia’s highest death toll soaring to 7,261.
The surge in new cases could keep investors and Indonesians with higher spending power wary, said David Sumual, chief economist at PT Bank Central Asia. Spending by such consumers would otherwise bring a significant multiplier effect to the economy as they make bigger purchases, he added.
Manufacturing contributes nearly 20% to gross domestic product, while household consumption accounts for about 60%. Capital Jakarta, which boasts the highest concentration of wealth, decided to extend social-distancing measures through Sept. 10 and keep cinemas shut.
“Testing, tracing and isolation should become the basis for policy making,” said Nurul Nadia Luntungan, a public health expert at the Center for Indonesia’s Strategic Development Initiatives. An on-off restriction policy must be carried out until a vaccine is discovered, she said.
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