POLITICAL ECONOMY POLICIES IN THE FACE OF THE
GLOBAL ECONOMIC SLOWDOWN DURING THE COVID 19
PERIOD
Introduction
Global economic volatility in the fourth quarter of 2022 was high. Significant price
spikes in the food and energy sectors have begun to be felt around the world due to a
decline in the stock levels of global food and energy supplies. The food and energy crisis
has made global countries wary of inflationary pressures and recession. This volatility has
also caused the economies of the world's countries to fluctuate with each other. The
turmoil in global markets such as the capital market, foreign exchange market and money
market has caused the world economy to oscillate. The oscillation of the global economy is
the beginning of the global economic crisis. Today, the world is being overshadowed by
major phenomena that have the potential to disrupt the global economic recovery process.
The first phenomenon is the increase in interest rates in the United States (Fed). This
interest rate hike has made it difficult for money to circulate. It also causes the cost of
borrowing to increase, reduces investment incentives, weakens manufacturing and
ultimately causes economic recovery to be slow. The third phenomenon faced by the world
is the issue of geopolitical tensions between Russia-Ukraine. This Russian military
invasion caused global tension to increase significantly because there are pros and cons
between countries in the world. This increase in global tension caused the world economy
to be shaken.
The shaking of the world economy is characterized by rising energy prices such as
crude oil and food prices globally. The third phenomenon faced by the world is the
Scarring Effect due to the Covid-19 pandemic. The Covid-19 pandemic yesterday had a
negative impact on the world economy, for example for United States in 2020 the formal
job market decreased below 40%. This decline in the labor market resulted in an increase
in the number of layoffs which is a tangible manifestation of the scarring effect. Economic
growth is income Gross Domestic Product (GDP) by ignoring the factor of increasing or
decreasing population growth (Zulkarnain, 2017). The International Monetary Fund (IMF)
projects that world economic growth in 2022 will be 3.2%. This projection is clearly lower
than last January, when the IMF projected the global economy at 4.1%. This projection is
also much lower than in 2021, which amounted to 5.7%. In 2023, the IMF surprisingly
published bad news for the world economy. The IMF surprisingly cut its global economic
growth projection to 2.9% in 2023. With this IMF projection, many countries will have
difficulty in obtaining state spending funds and difficulty in managing financing.
Eventually, many countries will encounter inflation and end up in a grim economic
recession.
The 2023 recession will be triggered by several things, namely, the strengthening of
the US dollar, the Russia-Ukraine conflict, climate change, inflation and also the
weakening of cargo (cargo crisis). United States as part of the world should be prepared to
face the threat of recession in 2023. The IMF speculates that United States economic
growth rate this year and in 2023 will still be haunted by global deceleration. United States
economic progress grew very impressively in the second quarter of 2022 at 5.4%. United
States economic growth is estimated to reach 5.1% on an annualized basis. However, the
volatility and turmoil in the global economy will cause United States to experience an
economic slowdown in 2023. As a developing country, United States is predicted to
experience inflation of 9.5% and will experience economic growth of 3.9%. With this
momentum, United States must start to be careful in setting economic policies to minimize
the impact of the 2023 global recession. In line with the issues and projections of United
States economic growth in 2023, the government needs to prevent the threat of recession.
Recession prevention needs to be done to minimize the impact, even avoid the impact of a
recession that is quite extreme for the community.
Impacts such as soaring commodity prices, increasing levels of layoffs, and even an
energy crisis. This will be a big homework for the government to prevent recession. A
reliable instrument is needed to counteract this economic threat. The concept that can be
offered to overcome and prevent the 2023 recession is the green economy. Green economy
is a principle to advance the economy and the welfare of society while still paying
attention to the surrounding environment. The world is currently facing serious problems
in the form of food and water crises, commodity and energy price volatility, increasing
greenhouse gas emissions, income inequality, chronic fiscal imbalances and terrorism
(World Economic Forum, 2012). Most developed countries face chronic fiscal imbalances,
while developing countries are vulnerable to other serious problems. Meeting the world's
growing demand for food, energy and infrastructure in a "business-as-usual" manner will
make supporting the world's ecology unattainable. As a result, commodity and energy
prices fluctuate, pollution goes unchecked, human health suffers and biodiversity systems
are lost. The effects of limited natural carrying capacity and the implementation of
business-as-usual development have prompted us to think about growth policy concepts
that combine economic growth with limited natural resources and environmental protection
efforts. One relevant concept is green growth. Green growth is intended to drive economic
growth and development by utilizing natural resources sustainably (OECD, 2011a),
efficiently using clean natural resources, minimizing pollution and environmental impacts
and being disaster resilient (World Bank, 2012a). In addition, green growth emphasizes
environmentally friendly economic progress in order to promote emission reduction and
socially inclusive development (UNESCAP, 2010). The purpose of this study is to
elaborate on the green economy in order to face the threat of the 2023 global recession.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
Research Objectives
This research aims to investigate how to overcome the economic crisis through
political economy policies. We will also explore the impact of the economic crisis, how to
control government spending.
Through a better understanding of political economy policies in overcoming
economic crisis in political policy, we can formulate more appropriate policy
recommendations to mitigate recession or how to avoid recession which will greatly
impact the society. This research is expected to provide valuable insights for policy
makers, academics, and other stakeholders involved in this matter. To evaluate the
effectiveness of fiscal policy based on political economy policy in overcoming economic
crisis and promoting sustainable economic growth. With this objective, it can focus on
analyzing the impact of economic policies based on political economy in overcoming
economic crises and achieving sustainable economic growth.
Overview
A recession is a state of economic obsoletion. This recession is usually
characterized by a country's GDP becoming negative and unemployment starting to appear.
The World Bank through its publication entitled "Is a Global Recession Imminent" projects
that in 2023 there will be a global recession. This projection is increasingly evident with
indications that have begun to occur, such as the aggressive increase in benchmark interest
rates by the central banks of various countries in an effort to reduce the rate of inflation
(Bisnis United States, October 1, 2022). Another indication is that many producers have
started to reduce their production due to weakening market demand. Investors also prefer
to pass their capital in dollars. The ultra-dollar phenomenon gives a very strong signal that
the world economy is moving towards recession (Kontan, September 27, 2022). Like a
huge economic shock, this recession has caused quite a few impacts on economic life in
the world.
First, the rising cost of living. This condition arises from the momentum of
economic recovery (post-pandemic) which in turn causes a very significant increase in
demand, but is not accompanied by adequate supply due to disruption in the global supply
chain. Since the beginning of the year, United Statess have been struggling with rising food
and fuel prices that took effect in early September. This pushed United States annual
inflation rate to around 6% last month.
Second, narrowing job opportunities. A major recession will cause companies to
reduce the number of these jobs. The contraction in the producer sector due to lack of
investment has made many offices choose to lay off workers during a recession. for
example, e- commerce companies such as Shopee, JD.ID, LinkAja, TaniHub, and Zenius
chose to shrink the number of employees.
Third, Degradation of state revenue. A high global recession will disrupt activities
exports, which in turn will weaken state revenues, especially non-tax state revenues
(PNBP). The signs that we can see from the disruption of export activity is that the trade
balance becomes a deficit.
Fourth, the decline in the rupiah exchange rate. in a recession investors will tend to
withdraw their capital from bonds and stocks. This is the forerunner of the decline in the
rupiah exchange rate. United States has experienced a major recession in economic history,
namely in 1998, which destroyed the United States economy. Soaring prices, falling rupiah
values, high levels of layoffs made a dark cloud at that time. As a rescue strategy from the
1998 crisis, Bank United States liquidity subsidy package was implemented for 16 banks.
670 billion for legal reform of press freedom and human rights. The government knelt
down to sign an agreement with the IMF for a $43 billion multilateral aid (loan) package as
part of the economic and monetary policy memorandum. The conditions of the 1998
economic crisis were particularly bad for the corrupt leadership and bureaucracy. The
rupiah had depreciated 254% year-on-year against the US dollar. Rp3,030 (Sep 1997),
Rp10,725 (Sep 1998), which is above the Rp16,000 level of 78.2% inflation (Aug 1998).
In previous research conducted by Darmastuti et al. discussed the policies taken by the
United States state in dealing with the recession caused by Covid-19. There are similarities
in the causes of recession during the pandemic and in 2023, namely the scaring effect. It is
known that the policies taken by focus on fiscal policy and strengthening the MSME
sector.
Fiscal policy from the government to deal with the pandemic by changing the
budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have a
major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities. This is in line with a statement from Soemartini which states that the
government's efforts in dealing with recessions by prioritizing the health sector social
security and regulating monetary policy. In addition, it is necessary to restructure financing
for MSMEs. From the two literatures, it can be concluded that to prevent a recession from
occurring more severely, it is necessary to support fiscal and monetary policies in priority
sectors in order to revive an economy that is experiencing a slowdown.
The steps taken by the government have been well implemented to restore the
economy. However, the problem of recession in 2023 will be more complex than during
the Covid-19 pandemic. The policies taken by the United States state in dealing with the
recession due to the Covid-19 pandemic focus on fiscal policy and strengthening the
MSME sector. Fiscal policy from the government to deal with the pandemic by changing
the budget deficit limit of 3% of GDP, and reallocating the state budget to sectors that have
a major impact on the macro economy such as the health sector, social security, tax
incentives and MSME stimulus. MSMEs, which are one of the largest contributing sectors
to GDP, must be transformed with the introduction of digital technology in business
activities (Darmastuti et al, 2021) Government efforts in dealing with recessions by
prioritizing the social security health sector and regulating monetary policy and
restructuring financing for MSMEs (Soemartini, 2020).
Inflation occurs due to too much money in circulation. To reduce the impact of
inflation, the central bank can take monetary policy to reduce the money supply by
increasing interest rates. The interest rate will adjust to the amount of inflation. A high
increase in inflation causes interest rates to increase (Mankiw, 2016).
Research Methods
The method uses a qualitative approach in this study. Qualitative research is
research that emphasizes descriptive questions that aim to describe a symptom in existing
facts (Ardianto, 2019; Semiawan, 2010). Qualitative methods are also open to changes that
occur in the research process (Ardianto, 2019). This research is said to be qualitative
because basically this research aims to study or examine an object in a natural setting
without any manipulation in it, and the expected results are not based on quantity
measures, but the meaning or quality aspects of the phenomena observed.
In this study, the researcher investigated communities affected by the economic
crisis. Cases in this approach are limited by time and activity, and researchers collect
complete information using time-based data collection procedures.
Results and Discussion
Political economy policy is a policy that can overcome the economic crisis about
interaction or relationships with society. According to Waters (2001) the main and ongoing
basis of economic internationalization is trade. Trade itself is understood as the activity of
two or more individuals exchanging goods and services (O'Brien & Williams, 2020, p.
109). Such activities would be called international trade if they are operated abroad. One of
the ways in which international trade affects the global economy is through free trade
regimes. The concept of free trade is based on the logic of comparative advantage
(Buchbinder & Rajagopal, 1996).Some experts also say that the Covid-19 pandemic
caused significant pressure on the global economic crisis, including the tourism, hospitality
and other industries.Each country is more focused on responding to Covid-19 and
imposing restrictions on activities, including economic activities. As a result, global
economic growth has also contracted. At the same time, many countries are protecting
their food from the prolonged Covid-19 outbreak which has caused the global economic
growth to contract has raised food prices due to insufficient supply. United States also
experienced a recession at the end of 2020 due to the Covid-19 pandemic. Therefore, in
2023, it is predicted that there are still many countries that have not fully recovered from
the impact of Covid-19. Second, the Russia-Ukraine war. The global economy has not yet
recovered due to the Covid-19 pandemic, and the Russia-Ukraine war broke out. The
Russia-Ukraine war, which began in February 2022, has cost the world GDP of $2.8
trillion (Bisnis United States, 2008).The Russia-Ukraine war disrupted global supply
chains, triggering crises, especially in the food and energy sectors, which in turn
accelerated inflation.
The simultaneous increase in benchmark interest rates by central banks around the
world will have an impact on economic growth and could lead to a global recession. The
potential threat of a recession in 2023 must be addressed wisely. Anticipatory steps must
be taken so that economic performance is maintained. Although the United States economy
is growing positively, we must not be careless about recession. If the realization of a global
recession does occur, the nation's economy will also fall into a deep abyss. In addition, the
depreciation of developing countries' currencies against the dollar has caused foreign debt
to increase more than predicted. In order to keep the economy stable in high inflation
conditions, tax incentives can be given to workers on income tax and given to MSMEs.
To deal with the global economic slowdown, political economy policies may
include fiscal stimulus, accommodative monetary policy, structural reforms, and
international cooperation. Fiscal stimulus involves government spending to boost
economic growth, while accommodative monetary policy can involve lowering interest
rates to stimulate investment and consumption. Structural reforms can improve economic
efficiency in the long run. International cooperation is important to address global impacts
and strengthen economic stability together.
In the face of the global economic slowdown during the COVID-19 pandemic,
political economy policy involves specific measures to respond to these challenges. Some
of the strategies that are commonly implemented include:
Fiscal Stimulus: The government may enact a fiscal stimulus package to support
affected sectors and boost consumer spending and investment.
Accommodative Monetary Policy: Central banks may lower interest rates to
stimulate lending and investment, and launch asset purchase programs to maintain
market liquidity.
Social Protection: Implementation of social protection programs, such as
unemployment subsidies and social assistance, to help citizens directly affected by
negative economic impacts.
Key Sector Recovery: Focus on the recovery of key sectors, such as healthcare and
technology, to drive long-term economic growth.
International Cooperation: Collaboration with other countries to mitigate global
impacts, including support for global vaccination programs and economic
cooperation.
Structural Reforms: Opportunities for structural reforms to improve economic
resilience, including changes in the health, education, and infrastructure sectors.
Keep in mind that effective approaches may vary depending on each country's
economic conditions and the level of COVID-19 impact on its economic sectors.
Conclusions
The problems that will be faced are similar to those that have occurred due to the
Covid-19 Pandemic, namely the occurrence of a recession, but there are contrasting
differences at this time, namely increasing interest rates. The triggers for the global
recession in 2023 are the still-felt impact of the Covid-19 Pandemic, the Russia-Ukraine
war, high inflation rates, and rising interest rates. The solutions that have been
implemented since 2020 have had a positive impact on restoring economic growth.
Therefore, some of the existing solutions are being reapplied with minor adjustments.
There is a solution to deal with the threat of a global recession, namely the implementation
of the Green Economy. The Green Economy implements policies, digitalization of
MSMEs, Food Security, Strengthening the Global Health Architecture and also the
Sustainable Energy Transition.
The digitalization of MSMEs and the provision of tax incentives have already
taken place. Meanwhile, the Strengthening of the Global Health Architecture and the
Sustainable Energy Transition are starting to be planned. Digitalization of MSMEs is
implemented with the existence of Fintech based on Payment Gateway and Digital
Marketing. Food security can be through fiscal policy to provide tax incentives for
fertilizer import duties and agricultural product taxes. Improving global health architecture
is realized through programs that focus on the distribution of public health needs,
pandemic preparedness financing, and global health governance. Sustainable energy
transition focuses on access, technology, financing, carbon tax implementation, and carbon
implementation planning.
