Faisal Basri Discusses Economic Policy in the Midst of a Pandemic at IDSC 2020

UNAIR NEWS – Political economy expert and University of Indonesia senior lecturer Faisal Basri was invited as a resource person at Batch I International Development Student Conference 2020 Faculty of Economics and Business UNAIR 2020 (IDSC 2020 FEB UNAIR). IDSC 2020 is an activity from a series of annual activities called Economic Week 2020. In this webinar held on Saturday afternoon (19/9/2020), the material brought by Faisal Basri is "Propitious Economic Decisions in the Midst of Unstable Conditions".

Faisal opened his material by explaining that the economic crisis caused by the COVID-19 pandemic was different from previous global or regional economic crises. This is because the trigger for the crisis is not from the financial sector itself, but from the health sector. So, he stressed that efforts to find an antidote to cure this economic crisis needed mindset because the effects of this crisis greatly impact almost all aspects of human life.

"This COVID-19 pandemic is a manifestation of the concept of true ambiguity in the theory of future predictions in the economic world because no one predicts that there will be a global economic crisis in 2020. Everyone thinks the economy will rise this year, in fact it doesn't," said the Vanderbilt University alumnus.

Faisal said that the short-term impact of the pandemic on the global economy was supply shocks and demand shock the same time. This is because the production and consumption sectors were stopped by the social restriction policies imposed by the government. He also presented economic growth data such as the UK and France as examples of how affected they were due to the pandemic. But strangely, the Indonesian economy was not so affected and according to Faisal, it was not something to be proud of.

“Our economic stability is greatly influenced by the fact that Indonesia does not implement strict social restrictions. They eat the sap first, but maybe next year things will return to normal, while we are still struggling with the handling of the virus and our economy is still stagnant like this,” the former National Mandate Party (PAN) politician criticized.

The bespectacled economist then explained that economic growth should be inversely proportional to the growth of the virus, but according to him the Indonesian government seemed to be ignoring it and the economy was loosened while cases continued to rise. Faisal added that if this was continued, it itself could change the economic behavior of the community.

“People will automatically change their economic behavior because uncertainty persists. They will be more careful in spending their money and tend to save because they are not sure when this pandemic will end. Business people are also reluctant to invest in this country because the conditions are not yet stable. The allocation of government spending will also change. So this early economic easing must be stopped immediately," said Faisal.

Faisal put forward the hypothesis that if Indonesia decides to implement strict social restrictions, he is optimistic that Indonesia can resolve the slumping economy in a short time. He cited the prediction of Dani Rodrik, an economist from Turkey, that the economy in the future will be dominated by the trend of rebalancing between hyper-globalization and the national economy, with the national economy taking precedence. Faisal concluded that Indonesia has a very capable national economy and this fact can heal the economic crisis caused by the social restrictions.

"The data I use to support this opinion is that the percentage of exports and imports in Indonesia's annual income is only around 39.8%, so it's not that big. FDI (Foreign direct investment) in Indonesia is also only 5% when compared to the percentage of exports and imports. Meanwhile, Indonesia still has 270 million people, of which most of them are also consumers. It's not that I'm against foreign investment, but Indonesia is actually great and can overcome the economic crisis. Our country's economy can still be independent," said the member of the Business Competition Supervision Commission (KPPU).

Finally, Faisal cited that the economic crisis of the COVID-19 pandemic is a crisis filled with uncertainty and complexity. Therefore, he stressed that the best certainty that can be present at this time for the community and the world economy is the government's ability to overcome this COVID-19 pandemic.

Author: Pradnya Wicaksana

Editor: Nuri Hermawan

source: http://news.unair.ac.id/2020/09/22/idsc-2020-faisal-basri-ulas-kebijakan-ekonomi-di-tengah-pandemi/