FEB UI and Oxford Collaboration Webinar: A Conversation on the Global Economy in the Midst of COVID-19
Rifdah Khalisha – Public Relations FEB UI
DEPOK – (19/10/2021) On Tuesday (19/10), the Faculty of Economics and Business, Universitas Indonesia and the University of Oxford held an online Collaborative Webinar titled “A Conversation on the Global Economy in the Midst of COVID-19”.
The event presented Prof. Dr. Ir. Dedi Priadi, DEA (Pj. Dean of FEB UI) for the opening remarks. Also present were the panelists, Prof. Andrea Ferrero (Professor of Economics – University of Oxford), Dr. Chatib Basri (Senior Lecturer at FEB UI and Former Minister of Finance of the Republic of Indonesia), and Teguh Dartanto, Ph.D. (Head of Research Group on Poverty, Social Protection, and Economic Development FEB UI). This event was hosted by Putu Geniki, Ph.D., from Oxford University.
Dedi said, “It is an honor for me to welcome the audience and open the discussion today. This webinar aims to bring together practitioners and scientists from Indonesia and Oxford to discuss the impact of the pandemic on the world, especially Indonesia.”
“We already know that the COVID-19 pandemic weakens all aspects of society and causes a significant decline in economic growth. I hope that through this discussion, we can find innovative solutions to overcome the challenges of the pandemic and create optimism for the future.” he said.
Andrea explained, “The pandemic has had a broad impact on the global recession 2020. The IMF World Economic Outlook Update, July 2021, shows that global economic growth will decline by -3.2 percent in 2020. However, according to projections, global economic growth will start to increase by 6, 0 percent in 2021 and 4.9 percent in 2022.”
Developed economies were also hit hard, around -5 percent. In fact, data from FRED and Author’s Calculations shows, when the pandemic broke out, the economy had not yet recovered from the impact of the 2008 crisis. With these various interventions, Andrea focused on discussing monetary policy during the COVID-19 crisis and beyond.
He reviewed and compared the actions taken by major central banks in terms of monetary policy, such as the Bank of England, the European Central Bank, and the Federal Reserve System. Unlike other economic crises, during the current COVID-19 pandemic crisis, there are shocks on the supply and demand sides simultaneously.
Basically, the central bank is able to respond to demand shocks with looser monetary policy, such as cutting interest rates to restore potential production and bring inflation back to target. He said, “The central bank should be more active than it was before the 2008 crisis.”
Furthermore, Chatib revealed, “During the pandemic there are still limited activities due to the implementation of health protocols. So, some industries face difficulty to reach a balance point or break even point, including the hotel business at 46%, restaurants 68%, retail FMCG 32%, non FMCG 42%, and the cement industry 54%.”
For him, the solutions to these problems are private investment, accelerate vaccination, and provide fiscal expansion. He said, “Monetary policy does play an important role in economic recovery. However, the government needs to carry out fiscal expansion to jumpstart, namely the expansion of the direct cash assistance (BLT) program for people with middle to lower economies.
Looking at the current condition of the real sector, Chatib considers tax incentives to be ineffective. Instead, the government should change the allocation of tax incentive funds into the expansion of BLT, credit guarantees, and the provision of interest rate subsidies.
If people’s purchasing power begins to increase, there will be demand and production. In this way, fiscal expansion is able to encourage investment and overcome the impact of the COVID-19 pandemic.
During the COVID-19 period, human daily activities have changed completely due to social restrictions. Since the government established a policy of working and studying from home, the crucial issue of the digital divide has begun to surface.
Teguh explained the condition of the gap. High-income people with high skills and easy internet access can work productively from home. Meanwhile, vulnerable people with low skills, and difficulties in accessing the internet are most likely unable to work from home.
The decline in human activity certainly has an impact on the decline in economic activity. Teguh said, “The digital divide, in this case including access to networks, devices, the internet, and knowledge of their use, has implications for a significant increase in poverty and inequality.” Teguh said.
In response to this problem, the government has increased the social protection budget for the Family Hope Program, Pre-Employment, basic food cards, discounted electricity bills, direct cash assistance from village funds, Jabodetabek basic food assistance, and cash assistance outside Jabodetabek.
“We need to focus on developing an adaptive and comprehensive social protection system, which means responding quickly to changes,” he said. (hjtp)
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