The Vulnerability of Developing Countries to the Economic Crisis Due to the Pandemic: What Can Indonesia Do?

Abstract

The spread of COVID-19 has had a significant impact on the global economy, including in Indonesia. The pandemic affected all economic performance, including growth, price stability, exchange rates, unemployment, poverty and so on. Although the crisis was felt by all countries, developing countries felt a greater impact than developed countries. Through a qualitative analysis, this paper aims to explain why this can happen, what are government policies for pandemic mitigation and what are their impact. The results show that the crisis caused by the pandemic in Indonesia was caused by four things, namely the dominance of the informal sector, limited fiscal space, poor governance and demographic differences between developed and developing countries. So, a strategy is needed to overcome these obstacles. Strategies that can be carried out are through evaluating government performance, increasing the budget deficit and moderating lockdowns. These three strategies are expected to be able to help Indonesia through the crisis caused by the COVID-19 pandemic.
 Keywords: COVID-19 Pandemic, Demographic Differences, Informal Sector, Limited Fiscal Space, Poor Governance