Indonesia slides into first recession in 22 years

INDONESIA has fallen into its first recession in 22 years as the coronavirus pandemic continues to take it toll.

Gross domestic product shrank 3.49% from a year ago, the statistics office announced Thursday, worse than the 3.2% contraction expected in a Bloomberg survey of 27 economists

Following a fall of 5.32% in the second quarter of 2020, this has pushed Indonesia into a recession.

The last time this happened was during the 1998 Asian financial crisis.

Still, officials saw hope in the fact that the contraction was narrowing. Compared to the previous quarter, GDP expanded 5.05% in the three months through September, while economists expected 5.55% growth. “This shows improvement, and the direction is getting more positive,” said the head of the statistics bureau, Suhariyanto, who goes by just one name. “We hope that the fourth-quarter situation will be even better with the easing of large-scale social restrictions.”

Indonesian stocks rose as much as 2.6% after the announcement, climbing to their highest level in nearly two months. The rupiah appreciated as much as 1.3% against the U.S. dollar, marking its third straight day of gains.

Authorities in Indonesia have predicted that 3.5m people could lose their jobs due to the coronavirus downturn.

Indonesia has the highest infection rate in the region.

Loss of tourism dollars

While agriculture is a major component of its economy, Indonesia relies heavily on tourist dollars.

Millions of foreigners fly to Bali each year in search of deserted beaches, terraced rice fields and sprawling Hindu temples.

But their numbers have dropped sharply since Indonesia closed its borders to non-residents, like other countries battling with the pandemic.

The 3.49% fall in economic growth during July to September is slightly worse than the 3% that economists had predicted.

The capital city Jakarta went into a second semi-lockdown for four weeks starting in mid-September with rising cases straining its health system.

“All in all, Indonesia’s economy is past its weakest point, but with the domestic outbreak not under control yet, economic activity is likely to remain under pressure,” wrote ANZ bank.

Government officials have pledged to accelerate spending to counter the pandemic’s impact and push Indonesia’s gross domestic product (GDP) back into growth.