The COVID-19 outbreak has been declared a ‘pandemic’ as it spreads uncontained throughout the world. While vaccine is still far from being available to the masses, the disease will more likely to harm society in two ways. The first one is directly, as the number of patients skyrocketed and the healthcare system is overwhelmed, making doctors have to make a hard choice: which patient have more chances to survive and need to be saved. The second one, the blow to the economy will be unprecedented, as many indicators have surpassed the pre-2008 crisis condition. This will be equally dire, especially in developing economies where millions are living in subsistence (i.e. can only fulfil their daily basic needs) and only a handful that can maintain their income by working from home.
Global trade also plummeted as supply chain is disrupted. This crisis tests the resilience of the global supply chain which underlies the 21st century economy. Whether or not a country is impacted directly by the disease outbreak, a disruption in supply chain can put the production process into a pause as raw materials may be hard to come by while buyers are dormant. We should expect millions to be jobless and many businesses to go bankrupt. Many estimates that the global economy in 2020 is going to be in recession, contracting by 1.3% from the previous year.
For Indonesia alone, Oxford Economics predicted the GDP to grow by 1.6% if the current rate of transmission and social distancing measures continue well into the second half of this year. Fixed investment will be lower by 0.15% from the previous year and the amount of trade (exports and imports of goods and services) will contract by 6.3%. Trade in services will receive the biggest blow, contracting by 9.5%. Indonesia’s bad performing trade and investment is reflected in the currency which is one of the worst performing in the region (17.83% YTD depreciation) while the stock market plummeted by almost 30% YTD.
What does this mean for services? The biggest blow which has been visible is on tourism and retail. Tourists that came to Bali alone in February has plummeted by 30% even though no cases were recorded during the month, while mall visitors dropped by 50% as of March 2020 (closures already instigated in some areas). Meanwhile, people will rely more and more on IT industry as white-collar workers are forced to work from home (despite nobody sure how long will this last as the economic downturn has domino effect on various sectors) and people need to entertain themselves and purchase supplies online.
In this crisis, it is paramount to keep the logistics system running. The government need to give incentive to the industry and most importantly to the worker in the sector which are more likely to be exposed to the virus (including gig-workers that have little social protections). In this light, coordination between businesses and government in the logistics sector should be ramped up. Data on availability of supplies should be made open, updated, and integrated. This will ensure prices to be kept stable and a balanced distribution of supplies across regions.
Workers in the key sectors must be protected while those that are prone to unemployment must be given assistance. Debt payment should be relaxed for both workers and small businesses. Most importantly, resources must be pooled between private and public healthcare providers. Existing manufacturers can be directed to produce necessary healthcare supplies. As the whole world is facing this crisis situation, countries should not reduce its cooperation. Restrictions on exports and imports would not help, and can even aggravate the situation (i.e. trade of medical supplies, research outcomes, etc.). In the end, no life should be compromised over economic activity, economy can recover but lives cannot. We should all work together to ensure the livelihood of people and minimise the death toll due to pandemic.