With global markets shuddering in the face of a price war in oil and the economic fallout from the outbreak of the corona virus, governments across the world are racing to shore up their economies and calm nervous investors. Fears of a global recession now loom large and many business leaders are recalibrating their strategies for the remainder of 2020.

With global markets shuddering in the face of a price war in oil and the economic fallout from the outbreak of the corona virus, governments acrss the world are racing to shore up their economies and calm nervous investors. Fears of a global recession now loom large and many business leaders are recalibrating their strategies for the remainder of 2020.

Indonesia, as with many other emerging markets will not be spared and the government’s GDP growth outlook for the year is already being revised. Finance Minister Sri Mulyani Indrawati earlier this week admitted that the impact of Covid-19  on the economy is as complicated as the 2008 financial crisis, which was triggered by the US subprime mortgage debacle.

“Although the driver is different, we see the same pattern or dynamic impact of Covid-19 on the financial sector and the real economy. It will hit the real economy because it deals with people’s willingness to move around and conduct activities, so the risk would be in the real economy,” she told local media.

“The possibility of job terminations comes from companies who cannot operate as usual, such as airlines, hotels and also the manufacturing sector, which is experiencing a disruption in the supply chain. There could also be an impact the financial sector because it could create NPLs [non-performing loans,” she added.

Indrawati is working with Bank Indonesia, the Financial Services Authority and the Indonesia Deposit Insurance Corporation (LPS) to try several policy options Including; relaxing income tax (PPh 21) for individual workers and relaxation of shares buyback without having to first conduct annual general meetings  for public companies. The measures are expected to be introduced in the near future.

“We don’t want to lose investors’ trust so we must act by using these fiscal instruments to convince them,” she said.

Meanwhile, several companies are moving fast to mitigate the impact of the Covid-19 outbreak on their operations and assess risk going forward. State owned lender PT Bank Rakyat Indonesia Tbk has done a stress test (assessment) on Covid-19 to measure its impact on their lending growth with the result showing minium downside.

“We didn’t revise our business target this year. Our lending growth target is still at around 10 percent to 11 percent this year given that our focus is on the micro-enterprise segment. Our credit to this segment grew 15 percent last year, much higher than the 5 percent growth for the corporate segment. So overall we estimate 10 percent growth this year,” said BRI president director Sunarso.


PT Asuransi Wahana Tata has also not revised its business target this year but is waiting for first quarter results to come in. The company is aiming for 10 percent premium growth this year in the hope of adding new customers by offering a wedding premium. Currently it is focused on vehicle insurance such as four wheel and two wheel vehicles; oil and gas; aviation and shipping industries.

“At the moment, our outlook and premium growth target remain the same which is around 10 percent but we still waitinf for first quarter results. If our performance does not improve, we will revise our target,” Christian Wanandi, its president director told the Indonesia Economic Forum.

Edi Sukmoro, President Director of state owned train operator PT KAI remains bullish on his company’s prospects for the year, expecting growth to range in the 4 percent to 6 percent range.

Ni Made Daryanti, chief investment officer for Allianz Life Indonesia feels that the Covid-19 outbreak will dampen business sentiment given numerous travel warnings issued by governments.

“But we are quite optimistic our premium can still grow by double digits this year. We will anticipate this headwind by increasing agency recruitment activities to capture more customers,” she noted. We are also confident that the Omnibus Bill will create a better investment climate, increase our competitivenes and improve labor productivity.”

“Last year our premium grew by 14 percent to Rp 40.18 trillion (US$280 million) while our pension fund also grew by 14 percent, she added.

One segment of the travel market that is definitely feeling the fallout is the religious travel to Saudi Arabia. According to Syam Resfiadi, president director of Patuna Travel, all umrah travel is on hold after the Saudi government issued a temporary ban for all visitors .

“As far I know, as many as 3,900 pilgrims from 75 travel agents cancelled travel last month, including mine,” he said.

It may still be early days in an emerging global crisis but already the impact is being felt far and wide. Indonesian business and government leaders must brace for some rough seas ahead as they enter unchartered waters.