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Controlled pandemic key to recovery as Indonesia falls into recession: Economists
Household spending fell 4.04 percent – slower than the 5.52 percent contraction booked in the second quarter – led by a spending slump in transportation, restaurants and hotels.
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Out and about: People enjoy the long weekend with a picnic at Ancol Dreamland in North Jakarta on Oct. 29, 2020. (JP/Wendra Ajistyatama)
T
he government’s ability to control the pandemic and boost purchasing power will be the key to economic recovery as Indonesia falls into recession in the third quarter for the first time since the 1998 Asian financial crisis, economists have said.
The Indonesian economy shrank 3.49 percent on an annual basis in the third quarter, as almost all gross domestic product components fell amid a persistent rise in COVID-19 cases, Statistics Indonesia (BPS) announced on Thursday.
The figure is worse than the 3 percent contraction forecast by a Reuters poll of analysts, as well as President Joko “Jokowi” Widodo’s expectation, but is still narrower than the second quarter contraction of 5.32 percent.
The Jakarta Composite Index (JCI) soared 3.04 percent to 5,260.33 on Thursday as the rupiah strongly appreciated 1.27 percent against the United States dollar to 14,380.
“Indonesia’s economy is on track for a slow recovery over the next few months,” Bank Permata economist Josua Pardede told The Jakarta Post shortly after the announcement.
“The main issue is that the middle-upper class citizens have held back on consumption amid all the uncertainty.”
The economy was likely to contract further by around 1 to 2 percent in the last three months of the year and it may continue to decline in the first quarter of 2021, he went on to say. “The recovery will not be strong before vaccines are available and the pandemic is under control.”
