Indonesia holds the G20 Presidency for the first time in the period from December 1, 2021 to November 30, 2022. However, this responsibility is carried out in challenging national and global economic conditions, followed by non-conducive geopolitical conditions which at any time can stimulate greater inter-block tensions. The final impact can be estimated, namely the world economy is getting worse.
Currently, Indonesia and the world are only slightly separated from the impact of the Covid-19 pandemic, which has lasted more than two years. The impact of Covid-19 is very serious on the national economy. Indonesia entered into an economic recession after negative economic growth in the second quarter of 2020 to the first quarter of 2021. As a result, the Indonesian economy in 2020 contracted -2.06%. An economic recession is when the economy grows negatively for two consecutive quarters.
Furthermore, the budget deficit swelled to reach the range of 5-6% as a consequence of the expansion of spending to mitigate the impact of Covid-19 through the issuance of state debt securities. A further consequence is that government debt swells to a ratio of around 40% to GDP. Although it is still under the provisions of the State Finance Law, this level has already passed the safe standard from the World Bank of 30%.
Covid-19 has also had an impact on Indonesia’s financial system. Circular impact that starts from the demand side and eventually to the sector and the financial system. Moreover, there is no other alternative for financing the mitigation of the Covid-19 impact except from the issuance of state securities (SBN). An increase in government debt has the potential to increase country risk, which could suppress global assessments of the resilience of the national economy. The impact is that it can lower Indonesia’s investment grade rating.
So far, the government’s efforts have been running on the right track, amidst many issues related to the effectiveness and efficiency of mitigation policies, especially those related to social assistance. The national economy began to recover in the second quarter of 2021, which grew to 7.07%. However, it was again depressed in the third quarter of 2021 (growing 3.51%) due to the rise of Covid-19. In the fourth quarter of 2021 and the first quarter of 2022, the economy has shown a return to its path with growth in the range of 5%.
However, the uncertainty has not stopped. In addition to Covid-19 which is still unpredictable, the world is faced with a war conflict between Russia and Ukraine which also has very serious impacts. Apart from the humanitarian impact, the economic impact is extraordinary. The world is facing rising food prices, which trigger a global food crisis. Global inflation rose sharply, leading to an increase in unemployment. World commodity prices are rising, and the world is also facing an energy crisis. This condition threatens the resilience of the national and global economy.
Observing these developments, it is important to continue to pay attention to strategic economic issues. To that end, the Master of Economics Study Program, Faculty of Economics and Business Universitas Diponegoro, held a series of public lectures with the theme: “G20 Presidency, Global Challenges and Resilience of Indonesia’s Economy and Financial System“. This Scientific Discussion Series will be held on Wednesday, June 22, 2022, online from 08.00 – 12.00 WIB.
The resource persons in this public lecture were Suminto, M.Sc., Ph.D. He currently serves as Expert Staff to the Minister of Finance in the Field of Financial Services and Capital Markets, Ministry of Finance of the Republic of Indonesia.
The event will be opened by Prof. Dr. Suharnomo, M.Si as the Dean of the Faculty of Economics and Business Universitas Diponegoro and moderated by Wahyu Widodo, Ph.D as the Head of the Master of Economics Study Program Universitas Diponegoro.