Indonesia: GDP seen contracting “just” 1.5% in 2020 – UOB

The Indonesian economy is now forecasted to contract 1.5% this year, less than initially predicted, according to Economist Enrico Tanuwidjaja and Haris Handy at UOB Group.

Key Quotes

“Indonesian economy still contracted in 3Q20 by -3.49% y/y, albeit better as compared to Q2’s contraction. The economic activities improved significantly on quarter-to-quarter basis as the country’s economy rebounded +5.05% q/q in 3Q20 vis-à-vis 2Q20’s -4.19%, showing a momentum for recovery.”

“In general, all GDP components by expenditure contracted; except for the government consumption expenditure, attributable to higher social and capital spending, as well as faster disbursement of National Economic Recovery fund.”

“Out of Indonesia’s top 5 contributing sectors to GDP (which comprise to 64.4% of GDP), agriculture remained as the most resilient sector.”

“Looking at Indonesian mobility level and the development of COVID-19, it is quite unlikely that Indonesia could post a positive growth in 4Q20. Overall, we now expect an almost flat growth in 4Q20 (of -0.30% y/y), bringing 2020 full year growth to -1.5% (between our previous worst and baseline case at -2.5% to -1.1%). Driven by availability of vaccine, adaptability in living with the virus, and “revenge” consumer spending, we expect Indonesia’s economy could return to positive growth territory starting in 1Q21, leading to full year 2021 growth at 4.3%.”