IPB University Research: Key Economic Stimulus Solution to the Impact of COVID-19

The impact of the COVID-19 pandemic on the economy was felt to be quite massive as a result of restrictions on the movement of society both internationally, nationally and locally. To find out the impact of the COVID-19 pandemic on the economy and food in Indonesia, IPB University through a team chaired by Dr. Widyastutik with R Dikky Indrawan, PhD, Dr. Heti Mulyati, and Syarifah Amaliah, MAppEc conducted a study using the recursive dynamic Computable General Equilibrium (CGE) approach.

The results of the study were delivered through The 13th IPB Strategic Talk webinar held by the Directorate of Scientific Information and Publication (DPIS), IPB University on Friday (5/6/2020). The presentation of the results of the study was responded by two experts as discussants namely Prof. Dr. Hermanto Siregar and Prof. Dr. Bustanul Arifin. The event also presented the Minister of National Development Planning (PPN) / Head of the National Development Planning Agency (Bappenas) as the Keynote Speaker, and was opened with remarks by the Rector of IPB University, Prof. Dr. Arif Satria and the Dean of the Faculty of Economics and Management (FEM), IPB University, Prof. Dr. Nunung Nuryartono.

The Research Team's presentation, represented by Dr. Widyastutik, presented four scenarios that were examined in this CGE model, including: a heavy scenario, a very severe scenario, a very severe scenario with a pessimistic impact of providing economic stimulus, and a very severe scenario with an optimistic impact of providing economic stimulus . The simulation captures supply and demand shocks that include decreases in productivity in the agriculture, manufacturing and services sectors, risks in the event of extreme climate phenomena such as El Nino, export demand shocks, social safety stimulus networks, payment transfers and the phenomenon of urban to rural migration. The four scenarios predict the impact on the economy through macro indicators, sectoral indicators, the agricultural sector, the distribution of household income and the impact on the regions of food producers and consumers.

Simulation results from the four scenarios indicate the possibility of a severe economic downturn compared to the previous few years. Economic stimulus in the form of social assistance (social assistance), especially for people in rural areas is needed in the short term to withstand the possibility of macroeconomic, sectoral decline and the impact on households. Economic stimulus in rural areas is needed to save the moving sectors, especially food. In addition to meeting the final demand for the food sector, households are also an input for other sectors and Micro, Small and Medium Enterprises (MSMEs) engaged in processed food.

The urgency of policy to prioritize food logistics (more than 70 percent) is needed. Guaranteed availability of agricultural inputs such as fertilizers, medicines and agricultural infrastructure is also very necessary to ensure the operation of the agricultural sector.

Social assistance policy, credit relaxation, credit interest subsidies for inputs in the agricultural sector are among the policy choices for the government. Innovations in digital-based agricultural production are an alternative choice when implementing physical distancing such as green houses and open fields. In the livestock and fisheries sector, policies that can be implemented are animal feed assistance, fishing gear and fisheries facilities and infrastructure. Digital-based innovation can also be done in marketing both for the agricultural sector and other food processing SMEs. Besides this the food crop sector is also the basis for employment.

The same thing is experienced by various other agricultural sectors such as livestock and fisheries. Optimization of pre-employment cards is a mitigation of the reduction in household and rural consumption and incomes. Other policy alternatives are the social safety net policy and the transfer of village fund allocations. Village funds can be labor-intensive programs based on transparent and accountable principles. Without an economic stimulus, it is seen that the centers of food production centers and non-centers show a significant impact of the decline. Economic stimulus is able to withstand the rate of impact of the decline on food production.

Regarding the availability of food stocks, Prof. Bustanul Arifin said, "Our rice stocks in June 2020 have started to run low at 1.5 million tons. It is estimated that until August rice stocks will erode in the community, the next critical point will occur in November 2020-January 2021. In an effort to maintain the availability of food stocks until February 2021, Prof. Hermanto Siregar suggested using all the potential that exists including utilizing home yards, tidal land and unproductive land. Furthermore, providing a clearer and more effective stimulus that is providing seeds and fertilizer for farmers.

"The scenario that can be done to absorb labor is to grow the agricultural sector in villages by using labor-intensive innovation and technology, processing and processing to add value to each commodity. There are many sectors that can be used as a foundation to revive other sectors, "he explained.

In terms of improving food logistics in COVID-19 conditions, Dr. Heti Mulyati said there are two things that need to be considered, namely logistics related to business as usual and logistics related to humanity (humanitarian logistics), specifically to deal with vulnerable people. "Logistics in business there are things that we need to prepare in terms of transportation, distribution, and inventory as well as cold chain," he explained.

The Rector of IPB University, Prof. Dr. Arif Satria stated that in principle IPB University continues to encourage existing policies in Indonesia, both stimulus policies, Large Scale Social Restrictions (PSSB), any relaxation must be based on science, so that the policies taken are more accurate, appropriate and effective while providing a solution. Science-based policy has become a necessity.

"The research results above mention the effectiveness of economic stimulus will be the key to how far Indonesia will recover or not from this crisis. Thanks to the collaboration of all of us from universities, the government and entrepreneurs will be realized recovery. And more importantly we must save the village as the Last Resort and as the foundation of life of the Indonesian people, "explained the Chancellor.

Meanwhile, PPN Minister / Head of Bappenas, Suharso Monoarfa, in the Strategic Talk event said that the large economic impact requires a large and rapid anticipation step. Efforts that have been made by the government in dealing with the impact of COVID-19 namely stimulus policies are given to reduce the economic impact, especially on vulnerable groups and businesses so as not to go bankrupt and so that the loss of welfare perceived by society does not exceed tolerance limits.

There are four stages of policy response to COVID-19: strengthening health facilities, protecting vulnerable groups and the business community, reducing financial sector pressures and post-pandemic economic recovery programs. The policy directions after the COVID-19 Pendemi include revitalizing the food system, meeting market needs and restoring employment in the agriculture and fisheries sectors. (IAAS / NAS)

Published Date : 06-Jun-2020

Resource Person : Prof Dr Arif Satria

Keyword : IPB University, Prediction of the Economic and Food Situation in Indonesia Due to COVID-19, CGE, Minister of PPN, Bappenas, Suharso Monoarfa, Computable General Equilibrium