Indonesia’s economy grew 7.07 percent in the April-June quarter of 2021 compared with a year earlier. Statistics Indonesia reported it on Thursday: the first expansion in five quarters for Southeast Asia’s largest economy.
Analysts polled by Reuters had expected 6.57 percent. The pace was the fastest since the last three months of 2004. Measured against the previous quarter, without seasonal adjustment, output rose 3.31 percent. Analysts had forecast 2.94 percent, and the January-March quarter was revised to a 0.92 percent drop.
Exports led the way, including a 56 percent jump in commodity shipments. Consumption and investment recovered and the government spent more. Household consumption, which makes up more than half of GDP, grew 5.9 percent. Transportation, warehousing, food and beverages grew fastest as people got moving again.
The statistics bureau cautioned that part of the headline number was arithmetic. The same quarter in 2020 was the weak, pandemic-struck base, so the comparison flatters the result. The economy shrank 2.1 percent in all of 2020, its first annual contraction since 1998.
The virus is spoiling the outlook
Indonesia passed 100,000 deaths from COVID-19 on Wednesday, with 3.53 million infections recorded. Health experts think the true counts are far higher. Mobility restrictions imposed since July now cover much of Java and Bali, and only essential and critical sectors are allowed to operate, at varying capacity. The order runs until at least August 9, and officials are eyeing a September reopening.
Economists are cutting forecasts. David Sumual, chief economist at Bank Central Asia, dropped his full-year estimate to between 3.6 and 3.7 percent from 4.5 percent. “We won’t completely return to pre-COVID-19 levels” this year, he said. Bank Mandiri lowered its 2021 outlook to 3.69 percent from 4.43 percent, economist Faisal Rachman said. The central bank trimmed its range to 3.5 to 4.3 percent, just under the government’s 3.7 to 4.5 percent.
A few analysts flagged a risk of a double-dip recession if the curbs drag on. Faisal said strong demand for Indonesian commodities could soften the blow; exports jumped nearly 32 percent in the quarter.
Policy will stay loose. Bank Indonesia Governor Perry Warjiyo has promised to keep it that way for longer, and the government says it will expand welfare programs and extend tax breaks. It has already spent tens of billions of dollars, while the central bank cut interest rates and financed part of the deficit directly.
