World Bank senior economist for Indonesia Ralph van Doorn said Indonesia’s economy may shrink 3.5 percent this year if the large-scale social restrictions imposed by several regional administrations nationwide last for four months.
Compared to 5.02 percent last year, Indonesia’s economy is expected to grow zero percent under its baseline scenario. Due to job losses and a decline in consumer confidence, private consumption expected to slow down. Because of weaker economic activity and lower commodity prices, a slowdown in investment growth also expected.
While household consumption expanded just 2.84 percent year-on-year from 5.01 percent during the same period last year, Indonesia’s economy grew 2.97 percent in Q1, the weakest since 2001. The economy seen contracting 0.4 percent this year, based on the government’s worst-case scenario.
The economy to shrink 1.3 percent and private consumption to contract 1.5 percent in 2020, Fitch Solutions in its research on May 6 projected. By easing restrictions in areas where infection rates are under control, the government is now pushing ahead to reopen the economy to prevent further weakening.
The government’s decision to reopen the economy was aimed at preventing massive bankruptcy and speeding up the economic recovery process after the threat had subsided, the Finance Ministry’s Fiscal Policy Agency director for macroeconomic policy Hidayat Amir said.
