top of page
  • Writer's pictureICMSS

The Inevitable Divergence: Part 1

Over the past few years, the COVID-19 pandemic and its socio-economic snowball effects, among other things, have caused an unavoidable whirlwind that left its mark in both developing and developed countries in the world. On account of some regions facing more difficult circumstances than the others, numerous questions have surfaced as global growth falls behind an unsteady and divergent trend. On the downside, many regions were hit by deep, looming recession and deindustrialization - with some nations including Zimbabwe, Argentina, and Turkey experiencing hyperinflation and other nations including the UK, Germany, and Italy doing hardly any better after hitting double-digit inflations. However, on the brighter side, the catastrophe left some irreversible trends which could act as a double-edged sword for certain countries. Those who were faster at implementing adaptive policies have a higher resilience level – ultimately shaping a stronger and more attractive outlook. For instance, despite the disastrous state of the world economy, the Indonesian economy has remained robust. The World Bank stated in its most recent Indonesia Economic Prospects that the country had a strong growth of 5.2 percent YoY in 2022 as a result of the nation's effective recovery and high commodities prices. Despite the optimism in several parts of the world, the prospective 2023 global recession has continued to generate fear among the greater public. In that regard, policies and steps that need to be taken by governments have to be weighted carefully. The use of macroprudential instruments and the reinforcement of restructuring frameworks are required due to the possible impact that tighter monetary conditions and slower development may have on global growth.

The dynamic market outlook indicates that the world is adapting to new conditions. The shift in consumer habits, driven by the COVID-19 pandemic, has increased demand for certain commodities. Social restrictions implemented by the government forced people to spend more time at home than ever before. However, the on-going geopolitical tensions pushed energy prices to the upper limits which also led to a higher cost of living for the wider population. Meanwhile, fiscal and monetary policies in Indonesia have acted as a reinforcement for the economy, helping to stabilize fluctuations during these uncertain times. One of the critical priorities for the Indonesian government following the crises is to support small and medium-sized enterprises (SMEs), which have been hit hard by the pandemic. The government had already implemented several measures, such as loan subsidies and tax incentives to help these businesses recover. Additionally, these implementations have helped to shore up the Indonesian economy, which has proven to be resilient in the face of the ongoing global crisis. Another area of focus is enhancing the country's competitiveness to attract foreign investments. Indonesia holds a large and growing consumer market, abundant natural resources, and a demographic bonus in which the productive age group dominates the population. Improving the investment climate could be accomplished by constructing regulations to tailor-fit the needs of global businesses. Furthermore, this act must also benefit the population at scale in increasing the quality of life in Indonesia, leading to a more inclusive and equitable economy.

Uncertain circumstances the world faces act on modifying the sectors to center on. Depending on the situation, a part of the world could be advantageous by their most vital sectors. As countries agreed to reopen their borders, migrations rose. Previously with the covid restrictions, nations dependent on tourism had suffered immensely. Exports revenues from tourism were expected to fall by US$910 billion to US$1.2 trillion in 2020. The global GDP was reduced by 1.5% - 2.8%. Most targeted countries to experience difficulties are developing countries and some Small Island Developing States (SIDS), where tourism accounted for an estimated 80% of the exports. Regardless of the once-deteriorating tourism sector, it is now considered to be one of the rising sectors. To get a closer look in Indonesia, a couple of tourist attractions have been designated as priority destinations by the government for the fact that they play a big part in foreign exchange. However, there are declining sectors that indisputably struggle in adapting to the post-pandemic era, that is employment. The transition of online to offline making it much costlier for companies to operate optimally. This eventually leads to mass lay off and makes the total of unemployed booms. What makes it more complicated is that most of the unemployed decide to start a total-unprepared small business that fails in months and return to their unemployment state, but in worse condition. In another scenario, the unemployed get trapped by the tantalizing capital market and sooner or later lose their money ultimately. This cycle has really taken the lead in pushing the global economy to recession.


International Monetary Fund

Ministry of Investment

World Economic Forum

What would you like to learn next week? Comment, Like, and Share

52 views0 comments

Recent Posts

See All


bottom of page