Indonesian Economy in Time of Covid: Surviving the Turmoil through Manufacturing Sector

Despite the global economic recession in 2020 due to the COVID-19 pandemic, the structure of the Indonesian economy remained relatively unchanged. However, a closer look reveals a long-term trend of deindustrialization since the early 2000s, affecting the export performance of the manufacturing sector. This chapter identifies a need for strategic interventions to leverage the manufacturing sector’s contribution to economic growth, emphasizing the importance of manufacturing in achieving convergence and escaping the middle-income trap. We argue that revitalizing the manufacturing sector is crucial for sustained and inclusive economic growth, countering the trend of premature deindustrialization. This chapter also suggests that Indonesia must prioritize the development of its manufacturing sector through addressing issues of financing, trade imbalances, and infrastructure. The government’s efforts, such as the omnibus law on job creation and infrastructure development, are recognized as steps in the right direction, but the study emphasizes the importance of a comprehensive approach to support the manufacturing sector’s growth and enhance Indonesia’s overall economic competitiveness.