Home News Alert! Indonesia is in Technical Recession, GDP Contracts 5.32% in 2Q

Alert! Indonesia is in Technical Recession, GDP Contracts 5.32% in 2Q

The statistics bureau reported Indonesia' economic growth plunged to 5.32 percent in the second quarter of 2020 compared to last year, said the chairman today (08/05) - Photo: Special

JAKARTA (TheInsiderStories) – The statistics bureau reported Indonesia’ economic growth plunged to 5.32 percent in the second quarter of 2020 compared to last year, said the chairman today (08/05). Compared to the previous quarter, the GDP also experienced a contraction of 4.19 percent.

But, in the first half of 2019, Indonesia’ economy still grow positively 1.26 percent compared to last year. Suhariyanto said, the two successive contractions make Indonesia practically entered the phase of technical recession.

Earlier, finance minister Sri Mulyani Indrawati sees Indonesia’ economic growth could drop by -5.1 percent of gross domestic products (GDP) in the 2Q of 2020 due to COVID-19 pandemic. In the 1Q of this year, the Southeast Asian largest economy’ growth dropped to 2.97 percent from previous year.

She said, the downward trend in the global economy is transmitting rapidly to the national economy, causing disruption on the demand and supply sides. Currently, the government uses the 2020 State Budget as the main instrument to tackle the impact of the epidemic and for the National Economic Recovery (NRP) program.

The minister rated the deepest impact of the virus happened in May and will improve in 3Q and 4Q into the positive zone. By the end of this year, she estimated the economic growth will ended in the range -0.4 percent to 2.7 percent of GDP. in 2019, the Southeast largest economy rose 5.0 percent of the GDP.

“With the dynamics that occurred in Indonesia in the second quarter our economy will be quite depressed and there will be a correction and we can minimize it in the following quarters,” said Indrawati during a hearing with the Budget Committee on Thursday (07/09).

Finance ministry reported in the first semester (1H) of 2020 the realization of budget deficit at 1.57 percent of GDP in line with the decline in state revenues due to the economic slowdown. While, the government spending still grow positively in order to support the handling of the impact of COVID-19.

The ministry said, the economic growth in the second semester is expected to improve and macroeconomic stability is maintained. To that, the economic growth is projected to be able to grow positively with the support of the NRP program. The stimulus program also its expecting to encourage the consumption in this semester, including investment.

However, the international trade is estimated to continue the contraction due to the low global demand. While, the inflation will increases gradually as consumption recovers. Food inflation is relatively under control, but there is still a risk of food price fluctuations during planting.

In addition, said the ministry the Rupiah is expected to strengthen inline with macroeconomic stability and capital inflows into the country, but remain alert to the risks of global financial market volatility. Then, oil prices still pose a risk of volatility due to the influence of global supply and demand and geopolitical factors. While, oil and gas lifting will be optimized to achieve the target by maintaining the economics of the work area, cost efficiency, and striving for on stream oil and gas projects in 2020 to run on time.

As reported, various international institutions provide various projections on Indonesia’ economic growth, which shows the high uncertainty, especially in 2020. The International Monetary Fund predicts the Indonesian economy at -0.3 percent and the World Bank mentions zero growth. The OECD also projects the Indonesian economy to be at – 3,9 to -2.8, while ADB projected -1 percent.

Written by Editorial Staff, Email: theinsiderstories@gmail.com