Indonesia officially entered the brink of recession in early November 2020. This happened after Indonesia recorded negative economic growth in two consecutive quarters.

The Central Statistics Agency (BPS) report shows that Indonesia's economic growth in the third quarter of 2020 contracted by minus 3.49 percent and minus 5.32 percent in the previous quarter.

Forbes reported, recession is a significant decline in economic activity that lasts for months or even years.

Experts say that a country enters the brink of recession when its gross domestic product (GDP) is negative, the unemployment rate rises, retail sales fall, and there is a contraction in income and manufacturing for a long period of time.

As a result of the Covid-19 pandemic, the recession is not only experienced by Indonesia. Liputan6.com said that the global recession in 2020 broke existing records by hitting 92.9 percent of countries in the world.

The 2020 recession was also triggered by global uncertainty that occurred before the Covid-19 pandemic.

But don't worry, the Coordinating Minister for Maritime Affairs and Investment, Luhut Binsar Panjaitan, said that Indonesia had left the gates of recession entering the third quarter yesterday.

"We have started to get out of the recession, with a contraction of 5.32 percent, yesterday it was only 3.49 percent. I think this figure is good," said Luhut in Labuan Bajo, East Nusa Tenggara, Thursday (12/11/2020).

Bank Indonesia is also optimistic that Indonesia's economic growth in the fourth quarter of 2020 will be positive.

In theory, there are a number of phenomena that are the main causes of recessions according to Forbes, namely:

1. Sudden Economic Shock

Economic shocks like this can cause serious financial damage. For example, the Corona virus outbreak, which is shutting down economies around the world, is the latest example of a sudden economic shock.

2. Excessive Debt

When an individual or business has too much debt, the costs of paying it can increase to the point where the entrepreneur can no longer pay the bills.

Increasing debt repayments and bankruptcies then turned the economy upside down.

3. Asset Bubble

When investment decisions are driven by emotions, poor economic outcomes quickly occur.

4. Too Much Inflation

Inflation is a stable and upward trend in prices over time. Inflation is not actually a bad thing, but excessive inflation is a dangerous phenomenon.

Uncontrolled inflation was an ongoing problem in the US in the 1970s. To break the cycle, the Federal Reserve quickly raised interest rates, leading to a recession.

5. Too Much Deflation

While uncontrolled inflation can cause a recession, deflation can have worse impacts. Deflation occurs when prices fall over time, causing wages to shrink, which further depresses prices.

6. Technological Change

New technological discoveries increase productivity and help the economy in the long run, but there may be a short-term adjustment period for these breakthroughs.

In the 19th century, there was a wave of improvements in labor-saving technology. The Industrial Revolution made entire professions obsolete, triggering recessions and hard times.

The impact of the recession that people, especially entrepreneurs, need to know.

The Economic Policy Institute revealed that a recession can have a long-term impact on a country. There are at least 4 impacts of the recession that Qasir summarized from various sources.

1. Unemployment Increases

There is no doubt that recessions and high unemployment rates lead to reduced economic opportunities for individuals and families. Job losses, reduced incomes, and increased poverty all result in harm to individuals and the broader economy.

2. School Dropout

Many researchers say education or "human capital" plays an important role in driving economic growth. Therefore, factors that cause reduced educational attainment for the nation's young generation, such as reduced family income, will have major consequences in the years to come.

3. Production of Goods and Services Declines

When this happens, national GDP will decline. If not addressed immediately, the domino effect of the recession will spread. For example, an increase in the number of bad loans leads to inflation or deflation.

4. Weakening Purchasing Power

Recession weakens people's purchasing power. Many people will lose their house or car because they cannot afford the installments. Entrepreneurs were forced to go out of business because sales dropped sharply.

Then, what should entrepreneurs do amidst the current recession?

1. Creative

A survey conducted by Paper.id in collaboration with SMESCO and OK OCE shows that there are two groups of entrepreneurs' attitudes in facing the Covid-19 pandemic which has caused a recession.

The first group, entrepreneurs with a level of optimism in Indonesia rising before one year was 67.32 percent and after a year it was 32.68 percent.

This survey was conducted online and sent to more than 3,000 MSMEs in 22 provinces of Indonesia

The survey results provide an illustration that entrepreneurs are required to be creative in dealing with the current situation.

The majority of respondents, amounting to 23.93 percent, chose to look for new markets. Meanwhile, 13.44% of respondents chose to pivot their business or sell new products.

They claim to sell goods that are currently selling well on the market, such as masks or health products. In fact, 8.52 percent of respondents decided to expand their business.

The Head of the Public Relations Section (KASI) of SMESCO Indonesia, Mirah Ayu, said that business sectors related to basic needs and health are increasingly in demand.

"And all digital-based businesses, both product services and sales methods, will be increasingly in demand, such as frozen food, herbal drinks, hand sanitizers, masks and travel kits to support the mobile lifestyle of society, which will likely be the most sought after both during and after the pandemic," he said in a press release to Qasir.

2. Revisit Business Model

CNN Indonesia reported that entrepreneurs must also review their business models in the face of a recession.

OneShildt Financial Planning Financial Planner Lusiana Darmawan said that business actors are obliged to do so. For those of you who already have a running business, Lusi suggests being more diligent in reviewing financial plans and reports. If usually only once a month, now it can be done more often.

3. Hold

Cash

Still reported by CNN Indonesia, during a recession, cash is king. Liquidity is also no less important.

"Tight money policy first, only spend money on the important things," said financial planner Aidil Akbar.

4. Data of All Obligations

Do not underestimate the obligations that must be paid or are due. You have to make sure the cash position is not worrying.

Therefore, data on all liabilities, assets and uncollectible receivables.

5. Find Out Help

Options

It's a good idea for you to find out what assistance is provided by the government in the midst of this recession. For example, you can ask the bank or other lending institution whether there is an option to postpone principal and interest installment payments during the pandemic. Don't hesitate to take advantage of electricity subsidies from the government.

6. Take advantage of technology

Data from the Central Statistics Agency reveals that online sales in Indonesia increased by 480 percent in April 2020. Of course, e-commerce or social media platforms are a suitable choice for MSMEs, so they can cut operational costs.

This also includes technology in managing a business, including recording transactions, digital payments and regular reports. If you think only large businesses need things like this, you are very wrong. Nowadays, this facility can also be obtained by micro entrepreneurs like you.

7. Use Management App

s

By implementing good business management, you can increase your business level. Therefore, you need correct business records. To make recording easier, use a management application such as Qasir.

The method is easy, just download the Qasir application, then you will immediately get convenience in recording transactions, monitoring product stock, monitoring business reports, digital payments with QRIS, and much more.

To download Qasir for FREE, click below.

However, the efforts of business people such as MSMEs will not be effective if there is no support from consumers.

Executive Director of the Center of Reform on Economics (CORE) Mohammad Faisal, as reported by Detik.com, said that one thing that can be done to save the economy in the midst of a recession is to buy local products from small and medium enterprises, aka MSMEs.

People can start by buying products in their surrounding environment. Therefore, start aggressively buying what friends, relatives or neighbors sell. This action is believed to be able to move the balance of the national economy, especially if carried out en masse.

You can also help MSMEs by entering or recommending your favorite MSMEs to the JagaUMKM.com portal. JagaUMKM.com is a portal where all MSMEs gather to make them easier for consumers to find. If you are a consumer, you can also buy their merchandise by looking for the MSMEs closest to your location, then contact them directly via the number listed

Let's together support MSMEs to continue to progress, because MSMEs progress, the nation's economy will also progress.

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