The gross domestic product (GDP), the broadest measure of goods and services produced, shrunk 5.32 percent year-on-year (yoy) in the second quarter, the steepest decline since the first quarter of 1999, Statistics Indonesia (BPS) announced on Wednesday.

All components except for net exports fell annually as the country was hit by the COVID-19 pandemic.

Household spending, which accounts for more than half of the GDP, fell 5.51 percent yoy in the second quarter, while investment, the second-largest contributor, contracted 8.61 percent. Exports and imports shrank by 11.66 percent and 16.97 percent, respectively, due to slowing global trade, but with imports dropping more than exports, trade had a positive impact on GDP in the second quarter.

Government spending, which is expected to anchor the economy and boost people's purchasing power amid cooling private-sector activity, plunged 6.9 percent during the period.

“Although we expect a recovery in the third quarter, the economy is at risk of recession if the government fails to ramp up spending and bolster household consumption,” Bank Central Asia (BCA) economist David Sumual told The Jakarta Post on Wednesday.

"The economic performance will depend heavily on whether the government can accelerate spending to jack up growth," he stressed.

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