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Economist Enrico Tanuwidjaja and Haris Handy at UOB Group assessed the GDP figures in Indonesia during the second quarter.

Key Quotes

“Indonesian economy contracted in 2Q20, for the first time since the aftermath of the Asian Financial Crisis, by 5.32% on a year-on-year (y/y) basis as the large-scale social restriction (PSBB – Pembatasan Sosial Berskala Besar) significantly reduced and hindered the economic activities compared to 1Q20. PSBB was deemed necessary to contain the massive spread of COVID-19 infections.”

“In general, all GDP components by expenditure experienced contraction. The top 2 contributors of the economy, private consumption (57.9% of GDP) and investment expenditure (30.6% of GDP) contracted by 5.51% y/y and 8.61% y/y, respectively.”

“The extent of 2Q20’s negative y/y growth is likely the trough in the contraction in output. Early indicators suggest 3Q20 GDP is going to be better amidst some reopening of the economic activities shunned in 2Q20 while the government has set aside a stimulus package coupled with several rate cuts by the central bank. Nevertheless, the economy is not out of the woods yet as the increasing number of COVID-19 cases forces cities across regions to maintain some degree of social restrictions and hence reducing economic activities to some extent. We now expect the economy to grow in the range of -0.3% to -2.5% depending on the effectiveness of implementation in abiding the health protocol, the development in the fatalities rate, the degree of PSBB/containment measure, and the speed of disbursement from government stimulus to the real economy.”