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COVID-19 expedites deindustrialization in Indonesia
The pandemic has led to a decline in the role of the manufacturing sector within Indonesia’s economy and, thereby, may contribute to a phenomenon known as premature deindustrialization.
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Technicians assemble NC212 aircraft ordered by Vietnam in a fixed wing hangar of state-owned airplane manufacturer PT Dirgantara Indonesia in Bandung, West Java, in this undated photo. (JP/Arya Dipa)
T
he COVID-19 pandemic may have expedited the deindustrialization of Indonesia’s economy as businesses and workers have been pushed out of the manufacturing sector.
The share of manufacturing in the country’s GDP in 2015 prices shrank to 20.08 percent in 2020 from 20.26 percent a year earlier, according to United Nations data.
Andry Satrio, who heads the Center of Trade, Industry and Investment at the Institute for Development of Economics and Finance (Indef), said he was hoping this decline would prove temporary.
Such a decline did not occur during the Asian financial crisis in 1998, which sent the country’s economy into a recession.
While the pandemic-induced decline appears small, it follows a downward trend that began in 2005, a year after the portion of manufacturing in the overall GDP value peaked at 23.68 percent.
