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Year-end retail sales worsen amid outbreak, protests
Retail sales dropped 16.3 percent in November, the biggest fall since May 2020 and coming on the heels of a 14.9 percent fall in October.
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ndonesia’s retail sales worsened in November and are expected to drop further in December amid a raging coronavirus outbreak and widespread protests over the Job Creation Law late last year, a further sign that the nation’s economic recovery remained sluggish in the fourth quarter of 2020.
According to a survey published by Bank Indonesia (BI) on Tuesday, retail sales dropped 16.3 percent in November from the same month last year, the biggest fall since May and coming on the heels of a 14.9 percent fall in October. The central bank expected an even deeper contraction of 20.7 percent in December.
The survey showed the sales of household and information and communication equipment contracted significantly in November, while sales of clothing and information and communication equipment were expected to drop sharply in December.
“The drop in retail sales is likely due to restrained consumer spending, especially during the large-scale social restrictions in Jakarta, as well as mass protests throughout October and November in several cities,” the central bank said in the survey, adding that further restrictions implemented by the government during the year-end holidays had subdued sales.
“Respondents have also expressed that unfavorable weather had contributed to lower retail sales,” BI went on to say. “But most respondents expect higher sales over the next three to six months in line with bolstered purchasing power and the upcoming religious celebrations.”
The worsening coronavirus outbreak in the country forced the Jakarta administration to reimpose strict social restrictions in the fourth quarter last year, though virus cases continued to rise to reach more than 858,000 infections and 24,900 deaths as of Wednesday.
Meanwhile, protests occurred throughout October and November as students, labor groups and environmentalists, among others, joined forces to protest the recently-passed Job Creation Law, which they said undermined labor rights and jeopardized environmental protection.
The prospect of recovery in retail sales depends on whether the government continues to restrict social activity, Bank Mandiri economist Faisal Rachman said, adding that retail sales had the potential to further grow going forward.
“The government’s success in suppressing daily virus cases and the mass vaccination program is the key to retail sales recovery,” he told The Jakarta Post on Wednesday. “The faster the government can stem virus cases and conduct mass inoculation, the faster economic recovery will be.”
The country’s GDP was expected to further contract in the fourth quarter last year as all components of economic activity, except government spending, were likely to shrink, he went on to say.
“Social restrictions remained the main barrier to economic recovery despite positive catalysts coming from the mass vaccination program,” he said. “Consumers are still holding up on spending […] Household spending recovery will heavily depend on the government’s ability to overcome the pandemic.”
Statistics Indonesia data show that household spending contributed to more than half of GDP and shrank faster than the whole economy in the third quarter.
