UNAIR NEWS – Political economist and senior lecturer at the University of Indonesia, Faisal Basri, was invited as a speaker at Batch I of the 2020 International Development Student Conference, Faculty of Economics and Business, UNAIR (IDSC 2020 FEB UNAIR). IDSC 2020 is part of a series of annual events called Economic Week 2020. In the webinar held on Saturday afternoon, September 19, 2020, Faisal Basri presented the topic " Propitious Economic Decisions in the Midst of Unstable Conditions ."
Faisal opened his presentation by explaining that the economic crisis caused by the COVID-19 pandemic is different from previous global or regional economic crises. This is because the trigger for the crisis is not the financial sector itself, but rather the health sector. Therefore, he emphasized that efforts to find an antidote to this economic crisis require mindset , as its effects have profoundly impacted nearly every aspect of human life.
"The COVID-19 pandemic is a manifestation of the concept of true ambiguity in economic prediction theory, as no one predicted a global economic crisis in 2020. Everyone thought the economy would rebound this year, but it didn't," explained the Vanderbilt University alumnus.
Faisal stated that the short-term impact of the pandemic on the global economy is a supply and demand shock . This is because the production and consumption sectors have been halted by social restrictions imposed by the government. He also presented economic growth data from countries like the UK and France as examples of how impacted they have been by the pandemic. However, oddly, Indonesia's economy has not been as severely impacted, and according to Faisal, this is not something to be proud of.
"Our economic stability is heavily influenced by the fact that Indonesia hasn't implemented strict social restrictions. They're taking the hit first, but things might be back to normal next year, while we're still struggling to deal with the virus, and our economy remains stagnant," criticized the former National Mandate Party (PAN) politician.
The bespectacled economist then explained that economic growth should be inversely proportional to the growth of the virus, but he believes the Indonesian government appears to be ignoring this and is relaxing the economy while cases continue to rise. Faisal added that if this continues, it could change people's economic behavior.
"People will naturally change their economic behavior due to the ongoing uncertainty. They will be more cautious in spending their money and tend to save because they are unsure when this pandemic will end. Businesses will also be reluctant to invest in this country because conditions are unstable. Government spending allocations will also change. Therefore, this premature economic relaxation must be stopped immediately," Faisal emphasized.
Faisal hypothesized that if Indonesia decided to implement strict social restrictions, he was optimistic that Indonesia could quickly overcome its economic downturn. He cited Turkish economist Dani Rodrik's prediction that the future economy would be dominated by a rebalancing trend between hyper-globalization and the national economy, with the latter taking precedence. Faisal concluded that Indonesia has a highly capable national economy, and this fact could potentially alleviate the economic crisis caused by these 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 significant. FDI ( Foreign Direct Investment ) in Indonesia is also only 5% compared to that percentage of exports and imports. Meanwhile, Indonesia still has 270 million people, most of whom are certainly consumers. I'm not against foreign investment, but Indonesia is actually a great country and can overcome this economic crisis. Our country's economy is still self-sufficient," said the member of the Business Competition Supervisory Commission (KPPU).
Finally, Faisal cited the COVID-19 pandemic as a crisis fraught with uncertainty and complexity. Therefore, he emphasized that the best certainty that can be provided at this time for the public and the global economy is the government's ability to address the 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/