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Economist Enrico Tanuwidjaja and Haris Handy at UOB Group reviewed the latest GDP figures in Indonesia during the January-March period.

Key Quotes

“Indonesia’s GDP growth slowed to 2.97% y/y in January – March 2020 period (the weakest pace since 2001) vis-à-vis previous quarter growth at 4.97%, as the coronavirus (COVID-19) pandemic halted business activities. The virus outbreak has taken a toll on the key drivers of the Indonesia’s economy – household consumption and investment spending (Figure 1). Nevertheless, the full extent of the pandemic’s impact might be felt more keenly later in 2Q20 and 3Q20.”

“Amidst the containment measure, household consumption (which makes up more than half of the country’s economy) slowed to 2.84% y/y in 1Q20 vs. 4Q19’s 4.97%… Most of the sectors’ growth slowed in 1Q20. Only 3 three sectors managed to record higher growth which include information & communication (1Q20’s 9.81% y/y vs. 4Q19’s 9.71%), financial & insurance services (1Q20’s 10.67% y/y vs. 4Q19’s 8.49%), and health & social work activities (1Q20’s 10.39% y/y vs. 4Q19’s 7.82%).”

“Considering the full impact of the COVID-19 to Indonesia’s economy has yet to be felt in 1Q20, we expect to see slower growth in Q2 and even Q3 (given stricter social distancing started in April 2020 as well as Idul Fitri “mudik” (travel) ban in which halting consumption), before a likely sharp rebound in 4Q to follow to 2021 (if the pandemic manages to settle down within the 3Q20)… Overall, we are in uncharted territory which making it difficult to forecast Indonesia’s economy going forward. Nevertheless, despite disruptions in overall economic activities, we now hold a cautiously optimistic view that the economy could still grow at 2.1% for 2020.”