Goodbye PPKM!

The era towards the endemic in Indonesia has begun, marked by the lifting of the status of the Restriction of Community Activities (PPKM) at the end of last year. What is the potential impact on the economy?

PPKM was lifted based on Indonesia being one of four G20 countries in 11 consecutive months that did not experience a pandemic wave. Indonesia's population immunity is also quite high, reaching 98.5% of the total population in July 2022. Nevertheless, the Government has not revoked the emergency status of the Covid-19 pandemic following the WHO's public health emergency of international concern policy. The public is encouraged to remain vigilant and not forget health protocols.

Despite the revocation, the social assistance programme (bansos) and several ongoing tax incentives are certain to continue to help the economic recovery process. Health sector assistance in the form of medicines and Covid-19 vaccinations is also continued.

In the business sector, the revocation of PPKM is considered to further encourage economic recovery in the country through increased productivity in the business sector, ranging from the trade sector, hotels, shopping centres, transportation, services, exhibitions, entertainment and others.

Community mobility is expected to continue to increase, especially for spending in the retail, wholesale and retail trade sectors. The performance of large-scale industries, ranging from manufacturing, services, to trade, is also expected to increase, strengthening Indonesia's resilience from global economic turmoil.

The Indonesian Chamber of Commerce and Industry (Kadin) assesses that the revocation of PPKM supports the stretching of micro, small and medium enterprises (MSMEs) that depend on community mobility.

MSMEs will be the sector most affected by the revocation of PPKM, as more open community activities will reach more consumers, so their performance can improve. The improved performance of MSMEs as a pillar of the national economy will also affect the absorption of labour, so that the quality of the household economy can improve.

In the capital market sector, the revocation of PPKM is predicted to not significantly affect the performance of the Composite Stock Price Index (JCI).

This is because since the beginning of 2022 economic activities in Indonesia have gradually begun to recover. Many industries have experienced a higher increase in work compared to 2021. On the other hand, economic activities have also adapted to the digital system built since the pandemic. 

Sectors related to tourism, hospitality, restaurants and cafes will increase and are expected to grow positively. This has been seen since the beginning of the third quarter of 2022 with growth above 10%. 

This policy will further increase the interest and trust of tourists, both domestic and foreign tourists. Moreover, the tourism and creative economy sector is targeted to produce a fairly high performance in 2023. The Minister of Tourism and Creative Economy said that the target of achieving domestic tourists reached 1.4 billion movements and 7.4 million foreign tourists in 2023.

Domestic economic conditions until the end of the year were still well monitored, influenced by people's purchasing power and the confidence of domestic economic actors that was maintained, as reflected in the level of consumer confidence, retail sales and manufacturing Purchasing Manager's index (PMI). 

Seeing these various conditions, Bank Indonesia projects that economic growth in 2022 will remain strong in the range of 4.5%-5.3%. It also projects Indonesia's 2023 economy to grow above 4.3%, well above the projections of emerging economies in the range of 1.8%.