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Indonesia business warns risk of layoffs, bankruptcies from new COVID-19 curbs

Indonesia business warns risk of layoffs, bankruptcies from new COVID-19 curbs

People wear protective face masks outside a shopping mall amid the COVID-19 pandemic in Jakarta on Dec 29, 2020. (Photo: Reuters/Ajeng Dinar Ulfiana)

JAKARTA: Indonesian business groups on Thursday (Jul 1) urged authorities to ensure there is enough financial support for companies, warning that otherwise new restrictions to tackle a surge in COVID-19 cases could result in layoffs and bankruptcies.

The "emergency" curbs, which come into effect between Jul 3 to 20, will shut shopping malls, force staff at non-essential businesses on the islands of Java and Bali to work from home and ban dining-in at restaurants.

The curbs come after Indonesia reported record daily numbers of coronavirus cases of more than 20,000, as the spread of the more contagious Delta variant accelerated infections and strained the country's healthcare sector.

Business groups, such as the Indonesian chamber of commerce, Kadin, said while the curbs were needed they were being reintroduced just as an economic recovery was gaining traction.

"The momentum was good. Every (economic indicator) had shown recovery," Kadin's deputy chairwoman Shinta Kamdani told Reuters.

READ: Malls shut, dining-in banned as Indonesia unveils broad emergency COVID-19 curbs in Java and Bali

The pandemic pushed Southeast Asia's biggest economy into its first recession in more than two decades last year, but the economy is expected to post its first annual expansion in the April to June period, with the government predicting 7 per cent growth.

Kadin is forecasting 5 per cent second-quarter growth, but the third quarter outlook will depend on how effectively the curbs contain the virus, Kamdani said.

Up to now, President Joko Widodo had been reluctant to bring in measures that might hit the economy and news of the curbs wiped out most of the gains on Indonesia's stock index, while the rupiah hit its lowest since April.

The Indonesian employers' association called on authorities to provide more fiscal support to help companies pay interest on bank loans and salaries, while revenues drop.

"We hope there can be a solution so that companies aren't going to all collapse or be declared bankrupt," chairman Hariyadi Sukamdani said.

READ: Indonesia's COVID-19 situation nears 'catastrophe', says Red Cross

Alphonzus Widjaja, who chairs a malls' association, warned that layoffs were inevitable, even though he said few outbreaks were linked to shopping centres.

Hariyanto Wijaya, head of research at brokerage Mirae Asset Indonesia, said if the curbs worked the medium-term economic outlook should be positive.

"I expect the emergency curbs will bring down daily COVID cases in Indonesia within two to three weeks, so the economy will grow better," he said, predicting a limited fall in the stock index during the period of tougher restrictions.

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Source: Reuters

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