FINAL EXAM MACROECONOMIC

RISKA WIDYAWATI P _ 29121403

YP 66B

1. Introduction : The Impact of Global Shock, COVID 19, to Global Transportation GDP
In the beginning of 2020, there is disruption that maybe never been imagine since last 100
years, that is The Coronavirus Disease 2019 (COVID-19). On March 11th, 2020 World Health
Organization (WHO) has defined the Covid 19 as global pandemic and lead many countries
stop their activity to prevent their citizen from the danger of Covid 19. The pandemic spread
very quickly from its initial country, China, to Europe, America, also Asia. In Indonesia, Covid
19 has bring many effects especially on national economic activity.

According to Loske (2020), the recent COVID-19 and other forms of epidemic and pandemic
outbreaks usually precede a severe effect on society especially in the area of economic
activities. To control the spread of the COVID-19, which is extremely transmittable,
governments in many countries including Indonesia establish several constraints such as
restrictions on the movement of people within the country particularly without essential
reasons, physical relations and proximity rules, compulsory use of face masks in public
facilities, and the temporary shut-down of business and service firms.

Although Indonesia never did the temporary shut-down of business and service firm, during
the pandemic, government establish restriction of movement for citizen almost in all regions.
This restriction known as Large-Scale Social Restrictions (PSBB) that restrict citizen to doing
trip to another place without any essential reason, including work, studying, business, etc.
This policy gives big impact on transportation & logistic industry which is in the last decade
being increase in-line with the technology development. Along the implementation of this
policy, the demand for transportation significantly decreased. Almost all transportation,
including air, water, and land transportation.

The graph is about people movement in

People Movement in Centre District and GDP Growth of
Transportation & Trade Sector
2020 that show that the lowest movement
occur in May 2020 since government
establish the PSBB. It contributes to lowest
GDP growth performance of
transportation & trade sector on 2nd
quarter GDP 2020. On 2nd quarter, the GPD
decrease to 30,84% (y-o-y). The movement
start to increase on Q3, that leads GDP of
transportation increase to negative
16,70%, but it is still lower than Q1.
 Low performance of
transportation sector along
2020, show on Figure 3. The
performance tend to
decrease and at Q3 2020,
most of them are below
IHSG. There are only 2
emitted whose index are
higher than IHSG along the
year. CMPP are PT Indonesia
Air Asia, one of the low-cost
carriers’ airlines in
Indonesia. Sales of CMPP
begin to decrease in 2020
and on Q3 2020 the sales are
decrease until more than
100% also it has negative
comprehensive income.

Other emmiten is PT Steady

Safe Tbk. (SAFE) whose
business are land
transportation also operates Trans Jakarta.

Decrease in aggregate demand or

real output represent by GDP of
transportation sector therefore
impact to decrease in Price Index of
transportation sector. The price
index on Q2 2020 the transportation
sub-index of the CPI basket in
Indonesia decreases to 101.72 point
in April 2020 from 102.97 point on Transportation Price Index (points)
January 2020.

This phenomenon of global shock that leads government establish public policy of people
movement (PSBB) leads decrease in aggregate demand or real output of transportation. The
shifting in aggregate demand give the impact of decreasing consumer price index on
transportation sector. The phenomenon if showed on Aggregate Demand and Supply (AD/AS)
model.
 In this case, demand of transportation shift
from AD to AD 2 on Q2 2020. This shifting of
demand curve to the left leads the output,
represent by GDP, also decrease. The output
represent on GDP of transportation decrease
from Ye to Y2. The situation not followed by
change in aggregate supply curve at the same
time. At the condition when the supply is
optimal, the price level decrease because of this aggregate demand shift.

2. Monetary & Fiscal Policy on COVID 19 Recovery

On 2021, government together with Bank Indonesia did recovery plan on economy in program
named Pemulihan Ekonomi Nasional (PEN). During February to September 2020, Bank
Indonesia did some instrument policy to maintain exchange rate, inflation, and financial
system stability. In other hand, government also establish some fiscal policy regarding of
Covid 19. Related to PSBB, government also decreasing level of PSBB. Therefore, people are
less restricted movement. People have been vaccinated can start to trip including business
trip or vacation with little requirement.

Monetary Policy : Decreasing Interest Rate (BI Rate)

One instrument that did by BI is decrease credit rate along year 2020. Decrease did by 25bps
in each month February, March, June, and July. By the instrument of decreasing credit rate
leads money spread more in the market and increase transaction. Therefore, the economic
still running well during Covid 19 in stabile low inflation. At September 2020, BI-7Day RR Rate
is decrease to 4%. Bank Indonesia tend to maintain this rate until December 2021. At the end
of December 2021, Bank Indonesia decide to maintain BI 7-Day Reverse Repo
Rate (BI7DRR) at 3,50%, and Deposit Facility Interest at 2,75%, dan and Lending
Facility interest at 4,25%

BI Rate Jan 2020 – Jan 202 Money Market Jan 2020 – Jan 2021

Low level of interest rate decreasing interest of people on investing money. On other side,
low level of landing facility rate, increasing interest of people to lend some money to do
transaction in real sector. Increasing money in the market, are followed by transaction in
transportation.

Fiscal Policy : Tax Incentive

In order to help industry and household maintain stability along pandemic, government
establish tax incentive in 73 industry sectors including trade, processing industry, and
construction. In the middle of 2021, government also establish tax incentive for
transportation. In airline industry, government decrease tax of PPH Badan from 25% to 22%
during Covid 19. This policy support company to easier maintain stability while decreasing
economic activity as the impact of pandemic and movement restrictions. Further impact on
tax incentive is price maintained stabile and often decrease little bit although the demand is
decrease while supply is constant.

Fiscal Policy: Incentive for households’ income (Increasing Government Spending)

During COVID 19 2020-2021, government spending is increase to recovery on health also

social impact to household. To cover the household consumption while their income is
decrease, government spend money to support household by giving them Bantuan Langsung
Tunai (cash transfers) to household and increasing salary of civil servant that has big impact.
This policy protect household from decreased income. Government spending also increase
while government decide to increase salary of civil servant. The focus of this policy is to
support stability and increase of consumption by household.
By this fiscal policy, income that represented by GDP per capita increase 8,5% USD 4,35 on
2021. Government goals of increasing income to make people could spend more on recovery
period.

3. Impact of Monetary & Fiscal Policy on COVID 19 Recovery to Transportation Sector

On transportation sector, GDP tends to

increase along the year 2021. At the
beginning of January 2021, GDP of
transportation sector reach IDR 169.660
billion. The value increase to 20,9% at the
end of 2021 to IDR 205.165 billion. This
increase in GDP for transportation sector has
represented the real impact of government
monetary and fiscal policy.

The impact of government policy on Covid 19 by decreasing regulation of PSBB and

maximizing vaccination to citizen has increase the aggregate demand of transportation. From
data gathering by BPS showed that people movement (showed by train, airline, and seaplane
passenger) has increase along 2021. With the regulation of decrease tax of PPh that
contribute to the lower price index of transportation lead the increase of demand. Therefore,
GDP from transportation as representation of real output or aggregate supply is showed tend
to increase.

AS/AD Demand Model

This graph shows the conditions of aggregate

demand and supply in recovery after pandemic.
On Q3 2020, government do some policy that
make people less restricted on movement. This
condition increase aggregate demand of
transportation are shift from B to A. Aggregate
demand could simply showed on increase on
people trip by train that increase 20% on Q3
2020. This shifting of demand, in aggregate
transportation demand, increase the price index
to P1. In Q2 2020 transportation price index is
101.72 points and increase to 103.1 in the end of the year 2020. Along with increase in
demand with the existing supply, price index continuously increase on the next year 2021.

IS/LM Macroeconomic Model and Money Market

Through IS/LM macroeconomic model, it showed that establishing monetary policy though
decreasing rate has impact of increasing GDP or real output. By decreasing the deposit rate
and lending rate people intention to do investment tend to decrease and prefer to spend their
money on trade also trip. money supply in market also increases along with the decrease of
interest rate. The demand on trip tend to increase supported by the government that doing
massive promotion on Indonesian tourist destination. Trade on longer many ways can
increase the transportation demand though the increase of logistic sector.

Illustrated by graphic bellow, i1 is condition when BI establish BI-7days rate almost 5% in

January 2020. on the right side, show that money in the market still low on rate i. In this
condition, GDP showed at graph IS model, is still low. However, when BI decrease the 7 days
rate to under 4% at the end of the year 2021, therefore, the money spread at the market was
increase (represented by LM curve tend to down right from Li to Li1). This condition when
much money spread in the market, will increase consumption that lead production, therefore
the real output increase in graphic IS.

Li

Li1

Multiplier Macroeconomic Model

Through macroeconomic multiplier model, government fiscal policy that is give income
incentive for household lead to increase real output. Income that represented by GDP per
capita increase 2,6% USD 3.855,80 on 2021. Government goals of increasing income to
increase purchasing power then people could spend more on recovery period. This increase
of income leads increasing household consumption or production In Q4 2021, national GDP
increase 12% to USD 1.186 billion. Transportation become the second one contributes to
national GDP growth with growth reach 7,9%.

Income per Capita 2012 - 2022 GDP 2012 - 2022

 The increase of income will lead demand shift
from AD1 to AD2 and leads to an increase in
output from Y1 to Y2. But with a multiplier, there
is a rise to AD and a further increase in output at
Y3.

Real output on transportation sector

represented by GDP transportation & logistic
sector that tend to increase along end of 2020 to
2021. Real output on transportation is supported
by increasing in people movement also logistic sector. Increasing income led people to do
shopping and increase logistic almost in all areas in Indonesia. Off course its need
transportation including sea, land, and air transportation. According to BPS, all of subsector
transportation are increased. Rail transportation increase 67,19%, land transportation
increase 18,15%, sea transportation increase 16,41%, river and lake transportation increase
6,55%, air transportation increase 137,74% and warehousing increase 33,62%.

Overall financial policy established by government and Bank Indonesia on recovery period of
pandemic 2020-2021 give impact on Transportation sector GDP. Increasing GDP on
transportation occur since Q3 2020 and continue to increase on next year of 2022.

Reference:

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