Indonesia’s Economy in 2022 Will Be Affected by These Factors


The Research Institute for Demographic and Poverty Studies (IDEAS) sees that poverty reduction work in 2022 will have formidable challenges. This is due to the uncertainty that comes from the Covid-19 pandemic and its new variant, Omicron.

In addition to the pandemic, there are also several factors that hinder the community’s economy, such as rising prices for some daily necessities. It is reported that some of the price increases have been felt by the public, such as the increase in the price of non-subsidized LPG, the increase in the basic electricity tariff, the increase in fuel prices due to the abolition of Premium, and the increase in excise rates for tobacco products.

Director of the IDEAS Research Institute Yusuf Wibisono in a written statement, Friday (21/1/2022), explained, “All of these things have great potential to increase poverty rates. For example, the dependence of poor families on cigarettes is very large, and even increases during the pandemic. With cigarettes being an addictive product, without efforts to free poor families from dependence on cigarettes, an increase in excise rates has the potential to increase the problem of poverty.”

Government focus

He added that this year’s poverty reduction performance will focus more on controlling the Omicron variant of the pandemic, the quality of post-pandemic economic recovery, and affirmative policies for the poor. Moreover, the main focus is on stabilizing the prices of basic necessities and social assistance programs.

If the government fails to control the transmission of the Omicron variant and then the variant quickly spreads across the country, then non-pharmaceutical interventions will certainly be adopted again to reduce the burden on the health system and reduce mortality. This is what causes great and prolonged economic damage.

However, if the pandemic is under control, economic recovery will not necessarily lift the economy and the lives of the poor. This is because the economic recovery tends to favor the upper class (K-Shape pattern) so the recovery in the poverty sector is very slow.

Yusuf said, “When the pandemic shows no signs of ending, the budget allocation for social protection (Perlinsos) actually decreases. If in 2020 the realization of the National Social Security Agency budget reaches Rp. 216.6 trillion, in the 2021 State Budget the allocation will decrease to Rp. 184.5 trillion, and the latest in the 2022 RAPBN is only planned to be Rp. 153.7 trillion.

According to him, Indonesia’s economic recovery must also focus on absorbing labor so that the benefits of the recovery can be felt by lower-level people. Moreover, poverty alleviation during this economic recovery period must also pay attention to social protection and strengthening effective protection.

PPKM level 4 caused the economy to collapse

On the other hand, Bank Central Asia (BCA) chief economist David Sumual said the risk to the economy from an increase in cases would be high when the government pulled the emergency brake in the form of implementing PPKM level 4.

However, if there is no change in PPKM to level 4, David is optimistic that the economic growth in the first quarter of 2022 is estimated to grow in the range of 5% YoY and the whole year can be in the range of 5.2% YoY.

He is optimistic that Indonesia’s economic growth will improve even though several economic factors are experiencing a negative trend.