In Preventing the Indonesian Economy from the Abyss of Recession, Here are few Suggestions from the IPB University professor

The COVID-19 pandemic has absolutely hit the economies of many countries, including Indonesia. Since the oubreak of the COVID-19 pandemic last March, Indonesia's economy was contracted to a level of -5.32 percent in Q2 2020 or drop 8.29 percentage point from the 2.97 level in the previous quarter (Q1 2020).

However, this condition cannot be called as a recession, because by the definition, a recession is a condition of negative economic growth for two consecutive quarters or more. Meanwhile, Indonesia's economic growth was only minus once, precisely in the second quarter of 2020.

"If in the third quarter of 2020 the economic growth will contract again, then the Indonesian economy can be called as recession," said Prof. Hermanto Siregar, a lecturer at IPB University who is also a Professor in Economics.

The economic contraction that occurred in the last Q2 2020 was caused by many factors. From the expenditure side, all components of expenditure, for instance public consumption, investment, exports, government consumption, consumption by non-government organizations and imports were experienced a decline. Meanwhile, from the production side, the transportation and warehousing sectors as well as the accommodation and food and beverage sectors are experienced the deepest contraction.

 "The biggest sector, especially happening in the field of industry that was contracted -6.19 percent. The worst contraction occurred in the transportation and warehousing sector (-30.84 percent) as well as the accommodation and food & beverage sector (-22.02 percent). These three sectors actually shared 25.7 percent of the gross domestic product (GDP). It is difficult for these three sectors to recover in the Quarter 3 because of the depth of the contraction, ”said Prof. Hermanto that was confirmed by telephone.

From the data of the Central Statistics Bureau (BPS), the trade sector, which is the third largest sector, was contracted -7.57 percent in the second quarter. Meanwhile, there are three sectors that are still growing positively, such as infocom sector with 10.88 percent growth, agriculture sector 2.19 percent and financial services (including banking) with 1.03 percent growth.

"Considering to the current status quo, in order to prevent a deeper contraction in the 3rd Quarter 2020, agriculture sector must be boosted and government consumption must be increased," he added.

The agricultural sector is experiencing exponential growth due to the good harvests of rice, corn, soybeans and horticulture. In regards to the efforts of boosting agricultural sector, Prof. Hermanto was further suggested that the government need go focus on optimizing agricultural resources that already owned by the farmers, especially agricultural land.

"Prioritizing programs for farmers can be done by optimizing the use of farmers' land first, not going into clearing new lands that do not involve farmers. For the food crops and horticulture, the farmer is the key. Without empowering farmers,yet the agriculture sector cannot progress, ”he explained.

In order to support the progress of farmers, aside from optimizing farmers' land use, he also emphasized that the role of extension workers and agricultural assistants should be increased in optimum way. According to him, this is important because farmers really need professional assistants who can quickly disseminate the agricultural and digital technology to the farmers. Not only that, in this pandemic era, agricultural inputs such as fertilizers, quality seeds and agricultural capital must also be increased substantially.

"The government must ensure the availability of subsidized fertilizers and quality of seeds. Assistance or access to capital for farmers also needs to be improved because the farmers need a large capital in order to optimize the use of their agricultural land, "explained Prof. Hermanto.

Regarding to the lack of assistants and agricultural extension workers in the regions, Prof. Hermanto was recommend the local governments in order to collaborate with universities in their regions.

"This effort will be pleased/welcomed by the higher education institutions whose lecturers also have an interest in implementing community service principles(tri-dharma). Agricultural lecturers is off course have the ability to provide agricultural extension or assist farmers".

The concern of campus in assisting farmers can also be in the form of real work lectures (KKN) or other community service programs. Thematic KKN allows the local governments to ask IPB University in order to send their students and lecturers to find a substantial solutions to a certain agricultural problems that faced by the farmers in that particular area.

Meanwhile, for the marketing strategy of agricultural products, Prof. Hermanto suggested that, in this pandemic era the local governments should participate in buying the agricultural products that was produced by the local farmers.

"Local governments have to be more concerned with the agricultural marketing. Local governments can work with the industry or the private sector to buy the agricultural products directly from farmers, then distribute them to the communities in need. By using this way, the farmers can actually avoid losses due to the falling prices, and can even get a reasonable profit which is very much needed in the era of the pandemic which is still full of uncertainty, "explained Prof. Hermanto. (IAAS/RI)

Published Date : 10-Aug-2020

Resource Person : Prof Hermanto

Keyword : economic recession, economic contraction, economic savior agriculture, IPB lecturers, advancing farmers