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Jakarta Post

Indonesia's retail sales tumble to biggest fall since 2008

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Wed, July 8, 2020   /   05:27 pm
Indonesia's retail sales tumble to biggest fall since 2008 A janitor sweeps the floor at Central Park Mall in Jakarta on June 3. Malls across Jakarta are operating under a new normal as the third phase of large-scale social restrictions ended on June 4. (JP/Seto Wardhana)

Indonesia’s retail sales index contracted by 20.6 percent in May, the biggest dive since 2008, dragged by plunging clothes sales, as well as cultural and recreational spending, a Bank Indonesia (BI) survey released on Wednesday has shown.

The contraction is steeper than in April, when retail sales in the country shrank 16.9 percent year-on-year (yoy), following the introduction of large-scale social restrictions (PSBB) in April and May to curb the spread of COVID-19.

“The retail sales performance will improve in June despite still being in a contraction phase,” the central bank stated in the survey.

The central bank projected the drop in sales to slow to 14.4 percent in June thanks to higher sales of food and beverage, as well as vehicle fuels, as Indonesia gradually reopened the economy.

According to the survey, spending on clothes in May fell 74 percent yoy, while recreational spending fell by 53.7 percent yoy and vehicle fuels fell by 45.4 percent yoy.

The coronavirus pandemic has battered the Indonesian economy this year, with the government expecting full-year growth to reach only 1 percent under a baseline scenario or for the economy to contract 0.4 percent under a worst-case scenario.

Indonesia booked its lowest GDP growth in 19 years in the first quarter at 2.97 percent, with the COVID-19 outbreak pressuring people to stay at home, thereby disrupting economic activity.

The central bank projected the retail sales index in the second quarter to contract 17.3 percent yoy, compared to contraction of 1.9 percent in the this year’s first quarter and 4.2 percent growth in the second quarter of last year.

According to the respondents of the survey, retail sales will pick up in the next three to six months following the reopening of the economy, which is expected to boost the public’s purchasing power.

The survey also indicated that inflation pressures will cease between August and November, with the price expectation index (IEH) in those months to stand at 138.6 and 142.5 respectively, lower than 162.6 and 146.4 in July and October this year.

Indonesia recorded the lowest annual inflation rate since 2000 in June, slightly below the central bank’s target range. The consumer price index (CPI) was up 1.96 percent yoy in June, a 20-year low and below Bank Indonesia’s target range of between 2 and 4 percent for the year.