Analysis of Indonesia’s Economic Growth in Q2-2020; Feeling the Peak Impact of the COVID-19 Crisis
On 05 August 2020, Statistics Indonesia (BPS) released Indonesia’s gross domestic product (GDP) data for the second quarter of 2020. These data, which were highly anticipated among analysts and policymakers, are crucial to comprehend how – and to what extend – the self-imposed social and business restrictions (made in response to the COVID-19 pandemic) have impacted on the Indonesian economy.
Indonesia’s Q2-2020 GDP data are particularly crucial to understand the impact of the COVID-19 crisis on the Indonesian economy because the restrictions were most harsh in Indonesia in April and May 2020 (both of which fell in Q2) as non-essential businesses had to close in Jakarta and West Java (which together with East Java form the nation’s economic centers), while people were encouraged to stay at home (for example by seriously limiting activities in shopping malls and ordering the closure of recreational areas and activities).
These social and business restrictions (locally known as PSBB or Pembatasan Sosial Berskala Besar) therefore have a very negative impact on production, consumption, trade and investment. Hence, economic activity nosedived in an unprecedented way.
It is this unprecedented nature of the COVID-19 crisis that has made it very difficult for analysts and economists to come up with accurate outlooks for economic growth, causing a wide margin in outlooks. In the case of Indonesia, some analysts in fact still expected to see modest economic growth in Q2-2020, while the majority of analysts expected a contraction.
What Did the Official GDP Data Say?
On 05 August BPS came with Indonesia’s official Q2-2020 GDP growth rate, thereby finally making an end to all uncertainty. The agency determined the contraction of the Indonesian economy at 5.32 percent year-on-year (y/y), the weakest GDP result for Indonesia since Q1-1999. The outcome was quite close to our forecast of minus 5.0 percent (y/y). However, our outlook was partly based on a (substantiated) guess due to the unprecedented nature of the COVID-19 crisis, and was also the subject of a series of revisions in the first couple of months of 2020. Only from mid-May 2020 onward we started mentioning in our reports that a 5.0 percent contraction was a realistic outlook for Indonesia in Q2-2020.
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Poll Indonesia Investments:
According to you at what pace will the Indonesian economy grow in 2020?
Voting possible: -
Results
- Lower than 0.0% (26.8%)
- Higher than 2.0% (17.9%)
- 0.5% - 1.0% (15.9%)
- 0.0% - 0.5% (15.8%)
- 1.0% - 1.5% (11.8%)
- 1.5% - 2.0% (11.8%)
Total amount of votes: 1025