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Accelerating the Economic Recovery in Indonesia Post Covid-19: Justice in the Energy Transition

Document Cited authorities 1 Cited in Related
Vincent
Published date01 August 2020
DOI10.3366/gels.2020.0018
Pages140-148
Date01 August 2020
Introduction

Indonesia is known as the largest economy in South East Asia and as one of the emerging lower-middle-income countries. Indonesia has managed to cut its poverty rate from 18% in 1999 to 9.4% in 20191. As the fourth most populous country in the world, Indonesia's economic growth only increased by 0.3% from 2015 to 2019. In early 2020, the Government of Indonesia was still optimistic with the economic growth reaching over 5% while other countries’ economy collapsed due to trade wars and geopolitics2. While Indonesia grew to 5% in 2019, global economic growth was only 3.2% and expected to grow to 3.5% in 20203.

Not knowing the pandemic (COVID-19) was happening, Indonesian economic growth was forecasted to grow and increase to 5.5% in 20204. In 2019, the GDP growth in Indonesia was 5.02%, and unexpectedly went down to 2.97% at the first quarter of 20205, and forecasted by the IMF to go down to 0.5% due to the pandemic6 when the global economy plummeted to −4.2%7. Another report on Indonesian's economy was published in response to the pandemic and forecasted that Indonesian economic growth is increasing to 4.2–4.6% in 2020 from 2.97%

Indonesia's GDP Growth.8

This pandemic that leads to global recession is unexpected for each country, including Indonesia. Indonesia has set its strategy in facing the recession and recovering from the pandemic. This strategy covers eight sectors. They are investment acceleration, industrial and trade (goods and services), financial, tourism, health, social welfare, infrastructure development, and human capital development. Unfortunately, this strategy does not mention the energy sector as part of its primary strategy9.

This paper discusses further the role of energy and natural resources, especially renewable energy development in the economic development post-COVID-19. This paper suggests that renewable energy development could contribute to the economic recovery in Indonesia.

 The role of energy in economic development

A study finds that energy consumption and GDP growth in a country has a positive relationship10. Another study finds that energy resources has a significant role in economic growth and social welfare11. Energy, sustainable economic development and environment are interrelated in the same way. The sustainable economic development can be achieved by having sustainable energy which will help the environment12. One of the important determinants of economic growth and development is energy development13. However, it conf‌irms that causality from GDP to energy consumption is relatively predominant in the OECD/developed countries as compared to the non-OECD/developing countries14.

The energy sector in Indonesia has been contributing to the economic development, which can be seen from the energy mix being stipulated in the National Energy Policy 2015 (RUEN, 2015). This sector was not explicitly mentioned in the national strategy for...

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