Indonesia: unemployment to spike due to COVID-19

Indonesia’s unemployment rate could hit the highest in more than a decade this year due to the current coronavirus pandemic, with Southeast Asia’s largest economy set to contract more than previously expected in the second quarter, ministers declared.

Planning Minister Suharso Monoarfa told a parliamentary hearing earlier today that 4 million to 5.5 million people could lose their jobs this year, pushing the unemployment rate up to 8.1%-9.2%, versus 5.28% in 2019.

The unemployment rate may remain between 7.7%-9.1% in 2021, he admitted.

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The forecast is still more conservative than Indonesia’s chamber of commerce and industry (Kadin), whose chairman expects new rounds of layoffs by August on top of an estimated 6.4 million jobs shed so far.

The number of people living below the poverty line is expected to rise to between 26.2 million to 27.5 million, Monoarfa explained, embodying a poverty rate of 9.7%-10.2% in a country with more than 260 million people.

“The Coronavirus pandemic between March 30 to June 6 ... has resulted in massive losses in working hours. This has shed around 362 trillion rupiahs ($25.67 billion) in purchasing power,” he explained.

The country’s minister estimations were made assuming that this year’s gross domestic product comes in within a range of a 0.4% contraction to a 1% expansion.

Finance Minister Sri Mulyani Indrawati estimated the same hearing: the second-quarter GDP expected to contract 3.8%, compared to the previous estimation for a 3.1% drop.

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She also warned about the recent rising number of coronavirus cases recorded in some of Indonesia’s biggest provinces, such as East Java, which could increase the pressure on GDP.

Monoarfa also predicted foreign exchange earnings from tourism this year would slump to $3.3 billion-$4.9 billion, from $19.7 billion in 2019.

The government has allocated nearly $50 billion in spending on healthcare, social protection and economic stimulus programmes to try to manage the dramatic pandemic’s impact.