Indonesia officially announced the first recession since 1998. The country reported a 3.49% contraction in Q3. The government is aiming for a speedy economic as well as pandemic recovery. However, the news has already affected numerals sections contributing to Indonesia‘s economy.
First recession in 22 years, slower spendings affect GDP
Indonesia’s economy is falling apart. While the 3.49% contraction in Q3 is still considerably better than the 5.32% recorded in Q2, the number still falls below Reuters’ prediction and President Joko Widodo’s expectation.
The country reportedly stumbled with its gross domestic product deteriorating amidst the COVID-19 pandemic. According to The Jakarta Post, Statistics Indonesia (BPS) reported a 4.04% drop in household spendings. A relatively smaller scale compared to the 5.52% contraction in the second quarter. Additionally, spendings on transportation, restaurants and hotels also plummeted. In contrast, healthcare and education are gaining more interest from July to September.
Indonesian government hopes for economy and pandemic recovery to go simultaneously
Quoted from The Jakarta Post, head of BPS, Suhariyanto delivered the news through a virtual briefing to reporters. “Although the economy continued to contract, there was a significant improvement in economic activity compared to the second quarter,” he said. Suhariyanto further continued, “we are hoping that economic activity will further improve in the fourth quarter with loosening social restrictions.”
As one of the government’s attempt to save the economy, Rp 695.2 trillion, or roughly US$47 billion, is allocated for a stimulus package.
However, ANZ Bank criticized the country’s effort to mitigate the pandemic outbreak and how it might greatly affect the country’s economic future. “Indonesia’s economy is past its weakest point, but with the domestic outbreak not under control yet, economic activity is likely to remain under pressure,” officials said, as noted from BBC.
How the recession affects Indonesia
Following the announcement, The Jakarta Composite Index (JCI) closed 3.04% higher today to 5,260.33 IDR. Consecutively, Rupiah values 0.89% higher against the United States Dollar with Rp 14,435. However, The Jakarta Post noted a 6.48% shrunk in investment with businesses cutting back machinery and other products investments. Accordingly, Indonesia recorded a 10.82% drop in exports and 21.86% plunge in imports.