Corona outbreak damages Indonesia’s tourism sector US$2 billion

Jakarta (Indonesia Window) – The Novel Coronavirus outbreak known as COVID-19 has an impact on the global economy, including Indonesia which is predicted by the Indonesian Institute of Sciences (LIPI) to be in a pessimistic zone.

“This economic condition is a challenge and we should respond quickly to overcome losses and restore the economy as expected by 5.04 percent by 2020,” Head of the LIPI Economic Research Center Agus Eko Nugroho said in LIPI’s website as quoted by Indonesia Window here on Thursday.

Agus explained that the potential loss in Indonesia’s tourism sector reached around US$2 billion.

“The value is the average impact of the tourism sector’s GDP which contracted around 0.009 percent,” Agus explained, adding that the air transport sector contracted around 0, 013 percent, accommodation 0.008 percent, and food and beverages around 0.006 percent.

“This is the first-round effect of what is happening, and it will affect even deeper if there is a second-round effect,” Agus noted.

Studies from LIPI Economic Research Center stated that the tourism sector is very closely related to the Micro, Small and Medium Enterprises (MSMEs), especially food and beverage, as well as wood and rattan products.

“These two sub-sectors will be significantly affected directly,” Agus said.

Other sectors that are directly affected are trade and consumption.

“Around 13 percent of exported products to China are affected, and 6.5 percent of imported goods from China have the potential to disappear from the Indonesian domestic market. As for consumption, it will be constructed from about 0.5 to 0.8 percent,” Agus pointed out.

That condition, according to him, will have an impact on the national economic growth in 2020.

“The government’s target of five to six percent of growth would not be met if the conditions go to the second-round effect where the impact will even be deeper,” he said.

Agus requested the government to keep monitoring the market conditions as the prices would be increasing ahead of the holy month of Ramadan and Eid al Fitr.

He suggested the government, specifically the Financial Services Authority (OJK), to provide credit maturity allowances for the MSMEs that were potentially affected by the weakening of the Chinese economy.

“A number of strategic steps should be prepared to reduce the potential negative impacts due to the global economic downturn and trade blocks because of the COVID-19 outbreak,” Agus said.

Reporting by Indonesia Window