Indonesia exits recession with 7% GDP growth in Q2, but virus clouds recovery

JAKARTA: Indonesia showed great signs of improvement as it effectively pulled out of recession in the second quarter of the year. The country reported its strongest annual growth rate in the past 17 years. As per the analysts, the country’s economic recovery is set to take a blow as the number of Covid-19 infections are increasing in the country.

Statistics Indonesia reported that South-East Asia’s largest economy grew 7.07% in the 2nd quarter compared to last year’s.

The growth rate was even stronger than the predicted 6.57% in a Reuter’s survey of analysts. It also had the highest growth rate since the October-December quarter of 2004. The revision was seen to be 0.71% from the first quarter’s transactions.

A steady rise was seen in exports from the country along with an impressive 56% growth in commodity shipments. A result of an increase in consumption and investments along with the government being active in its spending programme. However, the statistics bureau has said that the higher growth rate is also a result of low base effects. As compared to the weak second quarter of last year after the pandemic strike.

In the January-March quarter of the year, the country saw a revised 0.92% drop. Compared to it on a quarterly basis, the economy grew 3.31% while the experts predicted growth of 2.94%.

Even after the better-than-expected outcome in the economic sector Experts have shown their concern towards the economy. As they predict that the economy will take a blow after the Covid-19 infections resurface and as the mobility restrictions are imposed since July.

In Indonesia, last Wednesday saw a grim of more than 100,000 deaths in a single day with 3.53 million people positive with the virus. Health experts believe that the true numbers may be far more than those on the records.

The country is expected to face a decline in economic growth in the 3rd quarter of the year by 0.6 points to 3.5%. As a result of anti-virus measures being carried out, said David Samual, chief economist of Jakarta based bank Central Asia. He has also lowered his complete year estimate to be between 3.6% to 3.7% from 4.5%. Which he projected before the new wave of Covid-19 infections.

He also added that they do not think they can reach the pre-Covid 19 levels before the end of the year. Economist Faisal Rachman reported that Bank Mandiri has revised down its 2021 growth predictions from 4.43% to 3.69%.

The central bank had already shown its concern as they lowered its growth outlook. Projection from a range between 4.1% to 5.1% to the ranged of 3.5% to 4.3%, which is slightly below the government’s prediction of 3.7% to 4.5%.

As the Covid-19 infections and the antivirus measures taken continued to negatively affect almost every aspect of the nation’s economy. Indonesia’s economy decreased for the first time after 1998 by 2.1%.

Muhammad Asim