Indonesia’s first GDP growth in five quarters


Positive times: Fishermen take their boat out to sea at dawn in Lhokseumawe, Aceh. Indonesia is expected to report an economic growth of more than 6% in the second quarter. — AFP

JAKARTA: Indonesia is expected to report this week an economic growth of more than 6% in the second quarter, but a new wave of Covid-19 cases, which started to hit in June, is clouding the outlook for subsequent quarters, a Reuters poll showed yesterday.

The median forecast of 22 analysts in the poll was for gross domestic product (GDP) growth of 6.57% in April-June on an annual basis, the first expansion in five quarters.

That is also the fastest clip since 2010, albeit less optimistic than the government’s projection of 7% and the central bank’s estimate of 6.75%.

South-East Asia’s biggest economy shrank 2.1% last year, the first contraction since 1998, as the pandemic hit consumption and investment. It was still weakening in the January-March quarter, contracting 0.74% year-on-year.Analysts said the rebound forecast for the second-quarter was based on a range of positive data, including rising car, motorcycle, and cement sales, record highs in a purchasing managers’ index, as well as surging exports.

However, some said the forecast high growth rate was mostly a result of the base effect as economic activity plummeted when the pandemic first struck Indonesia in the second quarter last year.

Bank of America analyst Mohamed Faiz Nagutha described his 7% growth forecast as “underwhelming” and noted that on a quarterly, seasonally adjusted basis, “GDP is likely to remain flat to slightly up” compared with January until March.

Indonesia does not publish seasonally adjusted data, leaving economists to make their own estimates.

Meanwhile, a devastating new wave of Covid-19 infections, fuelled by the highly transmissible Delta variant, and mobility restrictions imposed since July to contain the spread of the virus are expected to hinder growth, analysts said.

Authorities have downgraded their 2021 economic growth projection due to the curbs. The central bank last month cut its 2021 outlook to 3.5% to 4.3% from 4.1% to 5.1% previously.

Governor Perry Warjiyo told Reuters in a Monday interview that 2021 GDP growth could still reach 4.1%, closer to the upper end of Bank Indonesia’s range, with exports from the resource-rich country seen remaining strong despite the curbs.

“This year, real exports in volume can grow 15.9% (on a yearly basis). It may even grow 23.7% in the third quarter,” Warjiyo said, adding that his estimate for April-June was for a 12.7% annual increase.

The government has increased its pandemic relief budget to over US$51bil (RM215.35bil) this year to respond to the rising number of infections. Bank Indonesia, which has cut interest rates to record lows and pumped liquidity worth over US$57bil (RM240.69bil) into the financial system, has pledged to keep interest rates low for a long period. — Reuters

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