Businesses under Pressure in Indonesia; Unemployment Increases as Companies Cut Operating Expenses
Most companies and industries have been under huge pressure since the Indonesian government imposed a range of restrictions (specifically on people’s movement and business activities) in an effort to curb the further spread of the novel coronavirus (COVID-19). As most companies experience a massive decline in sales, it has become difficult for these companies to finance their operating costs and expenses. And, the longer the restrictions last, the bigger companies’ financial burdens become.
Staff is typically among the biggest expenses for a business. Hence, when a company encounters financial trouble, management will usually take a look at whether it can cut the number of staff in order to cut expenses. In times of crises many companies may use this tactic to survive, and thus unemployment rises accordingly (which can subsequently trigger an increase in poverty, especially in the developing economies where a considerable number of people live just above the poverty threshold).
The ongoing COVID-19 crisis is unlike any other crisis we have seen in the past. The world has experienced a few huge financial crises over the past century but in those crises people’s consumption and most business activities could essentially continue as normal. In those crises, the victims were usually the bigger financial institutions, not the micro, small, and medium-sized enterprises. In this COVID-19 crisis on the other hand, the self-imposed business and social restrictions that were imposed by the government and are doing enormous damage to the economy are now disrupting nearly all companies, businesses, and people (hence society at large).
However, it are the micro, small, and medium-sized entrepreneurs who are most vulnerable in the COVID-19 pandemic as they typically have limited liquidity. And considering the micro and small entrepreneurs contribute about 99 percent to total business in Indonesia, it also makes Indonesia particularly vulnerable.
Considering many companies are currently facing big financial pressures, laying off workers becomes a serious option. Indeed, governments (including the Indonesian government) have set aside generous budgets to prevent businesses from making this decision. However, these budgets are limited, hence damage cannot be avoided.
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Poll Indonesia Investments:
According to you at what pace will the Indonesian economy grow in 2020?
Voting possible: -
Results
- Lower than 0.0% (26.8%)
- Higher than 2.0% (17.9%)
- 0.5% - 1.0% (15.9%)
- 0.0% - 0.5% (15.8%)
- 1.0% - 1.5% (11.8%)
- 1.5% - 2.0% (11.8%)
Total amount of votes: 1025
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