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[ANALYSIS] Stimulating a recovery amid the pandemic
While there was still a contraction, this realization was better than the economic growth of Q2, which amounted to minus 5.32 percent yoy.
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Indonesia gross domestic product growth forecast by the Asian Development Bank (ADB). (ADB/Asian Development Outlook 2020)
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fter eight months of the COVID-19 pandemic hampering business activities and people’s mobility, the current economy is starting to show gradual improvements. Indonesia's economic growth in the third quarter of 2020 was recorded at minus 3.49 percent year-on-year (yoy).
While there was still a contraction, this realization was better than the economic growth of Q2, which amounted to minus 5.32 percent yoy.
On a quarterly basis, Q3 economic growth experienced positive growth of 5.05 percent quarter-on-quarter (qoq), improving from the previous quarter, which was recorded at minus 4.19 percent qoq.
The improvement is in line with the easing of large-scale social restrictions (PSBB), which reopened economic activity. Several recent economic indicators have also shown positive development, such as Indonesia's foreign exchange reserves at the end of October, which were still high at US$133.7 billion; controlled inflation at a low level; a healthier current account deficit; and capital inflow into the domestic financial market.
Regarding the prospects for economic growth in the fourth quarter, it is estimated that the economy will improve further so as to support optimism over the financial market and maintain the flow of foreign funds into the domestic market. Throughout November, capital inflow recorded in the stock market reached Rp 3.4 trillion ($240.69 million) and Rp 13.3 trillion in the bond market, after experiencing a total outflow of $2.25 billion during Q3.
After the decline in COVID-19 cases and the ongoing vaccine clinical trials, it is predicted that economic growth will also gradually recover in the future.
The domestic economic recovery is also influenced by the positive outlook on the global economy. Global mobility, which shows an increase and expansion of the Manufacturing and Services Purchasing Managers' Index (PMI), also occurred in the United States and China. Consumer and business confidence also improved in the US and the European region.
