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Indonesian GDP to fall more than thought, country must get grip on virus: World Bank

Indonesia’s economy could contract more than expected if the coronavirus pandemic remains uncontrolled, as Southeast Asia’s largest economy faces an “uneven and volatile” economic recovery, the World Bank says.

Adrian Wail Akhlas (The Jakarta Post)
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Jakarta
Wed, September 30, 2020

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Indonesian GDP to fall more than thought, country must get grip on virus: World Bank Residents distribute staple food in their neighborhood in Tengah subdistrict, Kramat Jati, East Jakarta, on Sept. 25. Indonesia’s economy may contract more than expected if the coronavirus pandemic remains uncontrolled, the World Bank said on Tuesday. (JP/P.J. Leo)

Indonesia’s economy could contract more than expected if the coronavirus pandemic remains uncontrolled, as Southeast Asia’s largest economy faces an “uneven and volatile” economic recovery, the World Bank says.

The Washington, DC-based development bank now projects Indonesia’s economy to contract by 1.6 percent this year under the baseline scenario; in June it had projected zero growth. However, the economy may contract even by 2 percent if the country fails to control the pandemic, according to the World Bank’s East Asia and Pacific Economic Update published on Tuesday.

“It is in countries like Indonesia and the Philippines that recovery will be much slower, because they have not succeeded in controlling the disease,” World Bank East Asia Pacific chief economist Aaditya Mattoo said during a virtual press briefing on Tuesday.

“It may be well into next year that Indonesia will come back to pre-pandemic levels of economic output, and it may take them even longer.”

The lender expects Indonesia’s economy to rebound next year by 3 percent to 4.4 percent.

The government has also revised down its economic projection for this year to a deeper contraction of between 0.6 percent and 1.7 percent, as pandemic fear and uncertainty have taken toll on consumer spending and business investment. This would mark Indonesia’s first economic contraction since the 1998 Asia financial crisis, when the country’s economy shrank 13.13 percent year-on-year (yoy).

The coronavirus-induced economic crisis will hit hardest informal sectors like hawkers and services in Indonesia, Mattoo went on to say.

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