The economy continued to recover from its worst contraction of 5.32 yoy in the second quarter of 2020. Some indicators show that the economy could achieve positive growth in the second quarter if significant progress is made in the fight against the pandemic through a faster vaccine rollout and stronger enforcement of health protocols.

Some indicators in the first quarter of 2021 demonstrate that Indonesia has been experiencing a supply-side recovery. The annual growth of exports at 6.74 percent was higher than that of imports at 5.27 percent. Furthermore, exports also increased annually from minus 7.21 percent while imports recovered from minus 13.52 percent in the fourth quarter of 2020. These recoveries confirm that the supply side of Indonesia's economy has begun to awaken from its continuous low growth.

This is also reflected in several other indicators. Indonesia's manufacturing PMI shows positive progress from 52.2 in January to 53.2 in March. The automotive industry has recovered, as car sales turned from an annual decline of 34 percent in January to growth of 10 percent in March. The electronics industry, in particular communication devices and computers, also made progress in March.

However, for its inflation indicator, labor-intensive manufacturing, such as clothing and footwear, remain weak due low demand for durable goods. Nevertheless, demand for clothing and footwear is expected to increase in the second quarter due to Idul Fitri celebrations. They may also achieve accelerated growth like automotive and electronic sales.

In sum, the manufacturing sector has improved during the first quarter of 2021 and may boost Indonesia's economy to grow more this year. Data for the first quarter of 2021 confirms that the manufacturing sector has improved from minus 3.14 percent yoy in the fourth quarter of 2020 to minus 1.38 percent yoy in the first quarter of 2021. In addition to supply-side recovery, annual government expenditure representing counter-cyclical efforts to stimulate the economy also increased to 2.96 percent from 1.76 percent during the fourth quarter of 2020.   

Looking at the performance of different sectors during the global pandemic, Indonesia's economy can be likened to small cars pulling a big truck. These “small cars” are the sectors of health, social activities and information and communication technology, which have outpaced the overall economy. Meanwhile, the big truck is the manufacturing sector, which is growing at a below-average pace. Indonesia's economy could grow faster once the manufacturing sector starts to recover and can run by itself.   

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