Indonesia's economy decelerates 5.3 pct in Q2, 1st contraction since Asian financial crisis

Updated: August 6, 2020 Source: Xinhua News Agency
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The Indonesian economy decelerated in the second quarter this year, the first time since the 1997 Asian financial crisis as the partial lockdowns to rein the COVID-19 transmission hemmed in business activities.

The Indonesian Central Agency of Statistics on Wednesday announced that the economy of the country decelerated by 5.32 percent from April to June.

The restrictions had halted households from spending, decelerating consumption by 5.51 percent in the second quarter, while exports and foreign direct investment depressed, the agency's head Kecuk Suhariyanto said.

Consumption represents more than half of the country's gross domestic product (GDP) growth and exports are dominated by such commodities as coal and crude palm oil, which have crept up as of late.

Indonesia's manufacturing and retail sales had been dashed by the pandemic, according to the data from the central bank and the government.

The government has launched stimulus packages of 695.2 trillion rupiahs (about 47.54 billion U.S. dollars) to pare down risks of the pandemic, which makes the deficit swell in the state development budget to 6.34 percent this year.

On the monetary side, the central bank, Bank Indonesia, has trimmed 100 basis points of its key rate to 4.0 percent this year.

The lender agreed to purchase billions of U.S. dollars of the sovereign bonds issued by the government to help fill the deficit.

Indonesia has tried to accelerate the economy as it has resumed the business activities and eased restrictions since June in the hope it would make the economy recover in the third quarter, which may make the country escape a deep recession this year.

The government has cut its GDP growth forecast with the final expectation of minus 0.4 to 1 percent this year, while Bank Indonesia expected 0.9 to 1.9 percent growth this year.

President Joko Widodo has ordered the authorities to ramp up capital spending in all the provinces to help slow the economic downturn.

The novel coronavirus transmission remains afloat as of late in Indonesia with the daily confirmed cases settling at over 1,500.

Editor: Ting Liu