Economic Recovery Strategy of Sectoral Industries Post-COVID-19: Input–Output Model Simulations

Firmansyah Firmansyah (), Andrian Budi Prasetyo, Shanty Oktavilia, Siti Hilmiati Azyzia, Dita Wahyu Puspita, Albi Boykhair and Fadel Nugraha
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Firmansyah Firmansyah: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia
Andrian Budi Prasetyo: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia
Shanty Oktavilia: Faculty of Economics, Universitas Negeri Semarang, Semarang 50229, Indonesia
Siti Hilmiati Azyzia: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia
Dita Wahyu Puspita: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia
Albi Boykhair: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia
Fadel Nugraha: Faculty of Economics and Business, Universitas Diponegoro, Semarang 50275, Indonesia

Economies, 2023, vol. 11, issue 5, 1-22

Abstract: The global COVID-19 pandemic has suppressed the economy and people’s welfare, including in Indonesia and Central Java Province, as indicated by the weakening of the national economy by −2.06 percent and locally by −2.65 percent in 2020. Although the economy grew by 3.32 percent in 2021, societal welfare remains lower than in 2019, marked by an increase in unemployment and poverty throughout 2019–2021. Furthermore, the threat of COVID-19 including new variants of the virus continues to weigh on the economy, in 2022 and beyond. This study considered an industrial approach to production, based on inter-industrial linkages and policy simulations with input–output analysis. The objectives of this research are to analyze the impact of the COVID-19 pandemic on the economy of Central Java and to formulate an effective economic recovery policy for industry. The results show that the industries affected by the COVID-19 pandemic in Central Java can promote recovery of overall income in economic industry better than the leading industry and the industries with the highest output multipliers, expressed as a proportional increase in final demand for each industry. Meanwhile, the economic recovery strategy of increasing final demand in industries with high output multipliers results in a faster increase in economic output compared with increasing final demand in the affected industries or leading industries.

Keywords: economic recovery; COVID-19 pandemic; input–output; leading industries; industrial linkage (search for similar items in EconPapers)
JEL-codes: E F I J O Q (search for similar items in EconPapers)
Date: 2023
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