Source: Cnnindonesia.com | 02 Sep 2020

Senior Economist Indef Aviliani believes the government has taken a wrong step in protecting the domestic economy from corona pressure. This can be seen from the allocation of funds disbursed by the government for the national economic recovery program.

He said that a lot of the allocations were disbursed to support the supply side not the demand side. In fact, in the midst of conditions like now what is urgent to be repaired so that the economy is maintained is the people’s purchasing power which has dropped due to the Covid-19 pandemic.

In other words, said Aviliani, the government’s steps in pushing the supply side were in vain.

“On average, the business sector has begun to consolidate, no funding is needed at this time. The fear is that once enforced from the supply side, it will not show a positive effect, it can even cause a negative effect. So now the problem is more on the demand side until the end of the year, “he said via video conference, Tuesday (1/9).

As an illustration, the government has poured out Rp.695.2 trillion in funds for the national economic recovery program. Of that fund, IDR 491.3 trillion was used to support the supply side.

Meanwhile the rest is used for social assistance to support the demand side.

Furthermore, Aviliani said that if the PEN funds were forced to be liquid in the form of new credit assistance while business actors did not yet need capital, the existing funds would only accumulate into bad credit at a later date.

He advised the government to change strategy if it wants to avoid a recession in the third quarter. Time is running out, the administration of President Joko Widodo (Jokowi) has less than a month to boost economic growth in the next quarter.

“The problem is when there is no demand, but banks are asked to extend credit, there is cannibalism. Only taking credit from other banks or adding to existing credit, but in 2 years it will become bad credit, “he concluded.