Domestic and international mobility restrictions helped to reduce the numbers of confirmed Covid-19 cases until the end of 2021. Indonesia entered 2022 with caution, however, as Omicron cases began to rise. Recent success in managing the pandemic has coincided with what might be the start of an economic recovery, in no small part driven by high commodity prices—mainly for coal and palm oil—improving the fiscal and trade balances. The new tax harmonisation law is intended to lower the fiscal deficit to less than 3% of GDP by 2023, and a carbon tax will be implemented in April 2022—starting with a cap-and-tax scheme for coal power plants, before more sectors are included. Agriculture has played a key role in helping Indonesia to weather the pandemic, with the sector’s growth supporting employment and food consumption during the crisis. A resurgence in the palm oil price, together with rising agricultural wages and a narrowing of the labour productivity gap, has helped the agriculture sector lead the recovery, but concerns remain over the sector’s environmental footprint. Against recent food and environmental policy commitments, a renewed focus on increasing on-farm yields is a critical area for policy. We conclude with some reflections on the national palm oil replanting program and how better benefits might be delivered for smallholders and the environment.
- economic growth
- palm oil