Indonesia and the COVID-19 crisis: A light at the end of the tunnel?

The COVID-19 crisis is one of the most serious challenges in Indonesia’s 75-year history. It is testing all aspects of government and society, from health and social security systems to macroeconomic management and administrative capacity. The country’s health system has struggled, owing to past underinvestment and inconsistent management during the crisis. Macroeconomic management has been more surefooted, although the fiscal stimulus has been comparatively small and initially slow to reach its intended recipients. The social impacts are still unfolding, reversing the past decades of declining poverty and unemployment. Nevertheless, through a combination of good luck and effective management, the overall economic impact on Indonesia is considerably less than most of its middle income Asian neighbours. The economic decline in 2020 is also much smaller than that experienced during the Asian financial crisis. Predictably, there have been substantial subnational variations in socioeconomic impacts, ranging from the steep decline in tourism-dependent Bali to much smaller impacts in more remote, lightly settled regions. There is so far little evidence that the Widodo administration will change policy directions in any fundamental way as a result of the crisis.