Analysis of the Social and Economic Impacts of COVID-19 on Households and Strategic Policy Recommendations for Indonesia

Policy Research

The arrival of COVID-19 has created unprecedented challenges for the world. In Indonesia, the coronavirus has infected more than a million people since the first confirmed cases in March 2020 and tens of thousands have died. Coronavirus curbs on the economy and society continue to have a shocking impact on human development. After years of progress, poverty is rising again. One in ten people in Indonesia today are living below the national poverty line. Child poverty may increase significantly. The social impact would have been far worse had it not been for government assistance.

In response to the crisis, the government of Indonesia has introduced a massive fiscal stimulus package through the National Economic Recovery (PEN) program. Indonesia ranks among the top five countries in the Asia Pacific region in terms of the total amount devoted to combatting COVID-19 (ADB, 2021). In 2020 the government allocated IDR 695.2 trillion (approximately US$ 49 billion) to the program. With the crisis still unfolding, the government announced a budget of IDR 699.43 trillion (approximately US$ 49.3 billion) in February 2021 for the continuation of the PEN program this year (Kemenkeu, 2021).

Indonesia has continued to invest in strengthening its social protection programs to respond to the crisis. These have been expanded to protect today’s poor against major shocks as well as a growing number of low- and middle-income earners who have become vulnerable and are at risk of becoming tomorrow’s poor. Small businesses, too, are receiving assistance as they continue to contend with a contracting economy and public health restrictions.

To assess the impact of COVID-19 on Indonesia’s households and to inform government policies, UNICEF, UNDP, Prospera, the SMERU Research Institute and the National Statistics Office (BPS) collaborated on a ground-breaking survey in October-November 2020. The survey included 12,216 nationally representative households across all 34 provinces. It was the largest survey of the impact of COVID-19 so far and focused on children and vulnerable groups. It was based on face-to-face interviews with households interviewed by National Statistics Office as part of its National Socio-Economic Survey 2019 (SUSENAS). The survey and analyses were undertaken in close collaboration with the Indonesian government.

The impact of COVID-19 will continue throughout 2021 and beyond. However, the pace of support must continue to boost child and family wellbeing. Indonesia’s development partners stand ready to assist in this endeavour.