• Wednesday, Jan 20, 2021
  • Last Update : 12:46 pm

Indonesia suffers first recession in over 20 years, finmin says 'worst is over'

  • Published at 06:36 pm November 5th, 2020
Indonesia
A worker walks at a construction site during dusk in Jakarta, Indonesia REUTERS

Gross domestic product (GDP) shrank by a slightly more than expected 3.49% year-on-year as household consumption and investment fell in the third quarter, official data showed. Economists in a Reuters poll had expected GDP to decline 3% after a 5.32% contraction in the second quarter

Indonesia suffered its first recession in over two decades as the Covid-19 pandemic hit consumption and business activity in Southeast Asia’s largest economy, costing millions of jobs, the statistics bureau said on Thursday.

Gross domestic product (GDP) shrank by a slightly more than expected 3.49% year-on-year as household consumption and investment fell in the third quarter, official data showed. Economists in a Reuters poll had expected GDP to decline 3% after a 5.32% contraction in the second quarter.

Finance Minister Sri Mulyani Indrawati told a news conference the “the worst is over” pointing to a sharp rebound in quarterly GDP in the July-September period.

But a separate statistics bureau survey showed some 2.6 million people had lost jobs in the year to August due to Covid-19, pushing the unemployment rate to a nine-year high of 7.07%.

A 9.8% rise in government spending helped soften the blow, but economists called on more stimulus to lift the economy.

“The government will focus on further accelerating economic recovery and returning to positive economic growth,” said Sri Mulyani, adding authorities would boost spending in the fourth quarter.

The rupiah and the main stock index .JKSE briefly pared gains after the data.

Indonesia’s first recession since the Asian financial crisis in 1998 - normally defined as two consecutive quarters of economic contraction - comes as the country has struggled to contain the coronavirus outbreak. It has the highest caseload and Covid-19 death toll in Southeast Asia.

Indonesia introduced restrictions to contain the spread of the virus earlier this year, many of which were lifted in June, but the government imposed a second round of curbs in Jakarta for a month in September.

Household consumption, normally the economy’s main growth engine, fell 4% on an annual basis in the third quarter, while investment dropped 6.5% and exports tumbled 10.8%.

GDP grew a non-seasonally adjusted 5.05% quarter-on-quarter, up sharply from a 4.19% contraction in the second quarter but below a 5.34% forecast in the Reuters poll.

The government had spent 52.8% of its 695.2 trillion rupiah ($48.3 billion) pandemic-relief budget year-to-date, official data showed.

“Given the unfathomably slow pace of fiscal stimulus disbursement ... the pressure is on monetary policy to do more,” said Wellian Wiranto, economist with OCBC.

Bank Indonesia (BI) Governor Perry Warjiyo has said the central bank has further room to act after 100 basis points of rate cuts this year and more than $30 billion of government bond purchases. BI’s next monetary policy review is scheduled on November 18-19.

The data comes after thousands of people took to the streets in the youthful nation in October calling for the reversal of a controversial law aimed at job creation that protesters say comes at the expense of the environment and labour.

David Sumual, an economist at Bank Central Asia, said the recession was unlikely to trigger social unrest due to the increase in social spending for the most affected communities.

53
Facebook 51
blogger sharing button blogger
buffer sharing button buffer
diaspora sharing button diaspora
digg sharing button digg
douban sharing button douban
email sharing button email
evernote sharing button evernote
flipboard sharing button flipboard
pocket sharing button getpocket
github sharing button github
gmail sharing button gmail
googlebookmarks sharing button googlebookmarks
hackernews sharing button hackernews
instapaper sharing button instapaper
line sharing button line
linkedin sharing button linkedin
livejournal sharing button livejournal
mailru sharing button mailru
medium sharing button medium
meneame sharing button meneame
messenger sharing button messenger
odnoklassniki sharing button odnoklassniki
pinterest sharing button pinterest
print sharing button print
qzone sharing button qzone
reddit sharing button reddit
refind sharing button refind
renren sharing button renren
skype sharing button skype
snapchat sharing button snapchat
surfingbird sharing button surfingbird
telegram sharing button telegram
tumblr sharing button tumblr
twitter sharing button twitter
vk sharing button vk
wechat sharing button wechat
weibo sharing button weibo
whatsapp sharing button whatsapp
wordpress sharing button wordpress
xing sharing button xing
yahoomail sharing button yahoomail