JAKARTA: Indonesia’s gross domestic product (GDP) is likely to shrink by 3.1% on-year in the second quarter due to weak economic activity amid movement curbs to control the spread of the coronavirus, Finance Minister Sri Mulyani Indrawati said on Tuesday.
Indrawati said in an online briefing the economy may recover in the following quarter, but may still record a contraction, while positive GDP growth may return in the final quarter of 2020.
Her baseline outlook for 2020 GDP growth remained between -0.4% and 2.3%, but she said growth looked more likely to be within a range of 0% to 1%.
A document she presented in the briefing showed a projection of 8.2% GDP growth in 2021.
Meanwhile, Indonesia’s retail sales dropped 16.9% in April from a year earlier, thanks to a decline in sales of all goods surveyed, the central bank said on Tuesday.
The fall was the biggest since November 2008.
April sales contracted further from a drop of 4.5% in March and the Bank Indonesia survey predicted sales to continue falling in May by an estimated 22.9% annually.
The central bank is expected to make its third rate cut this year on Thursday to step up its support for Southeast Asia’s largest economy amid the coronavirus pandemic, a poll showed on Tuesday.
Eighteen of 30 economists in the poll expected Bank Indonesia to cut the benchmark 7-day reverse repurchase rate by 25 basis points (bps) to 4.25% – the lowest in two years. Another economist pencilled in a 50 bp-cut.
The other 11 predicted BI would hold the rate at 4.50%, arguing that the rupiah is once again under pressure due to fears of a second wave of coronavirus infections.
Those predicting a cut said BI needs to act to support economic recovery as Indonesia began to ease movement restrictions, even as the daily number of new coronavirus cases rises.
Plunging exports and imports, lethargic retail sales, clumping car sales and an inflation rate that struck a 20-year low of 2.2% in May, have reinforced expectations of acute economic pain due to the pandemic. – June 16, 2020, Reuters
