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Indonesia’s economy decelerated in the third quarter as harsh lockdowns to contain a record spike in Covid-19 cases outweighed higher commodity prices and trade.
Gross domestic product in the quarter rose 3.51% from a year ago, the statistics bureau announced Friday, down from 7.07% growth in the second quarter, as the virus wave peaked in July and August. That undershot both the median estimate of 3.88% in a Bloomberg survey of economists and the government’s projection of 4.5%.
“Third-quarter growth slipped below market consensus as mobility curbs implemented during the period likely weighed on consumption, offsetting robust exports” said Nicholas Mapa, a senior economist at ING Groep NV in Manila. “We expect better fourth-quarter GDP results as movement restrictions have been relaxed further.”
Indonesian stocks extended declines Friday after the report, with the Jakarta Composite Index falling as much as 0.2%. The rupiah was down 0.4% to 14,388 rupiah to the dollar as of 9:41 a.m. in Jakarta.
Authorities had ordered people to stay home and shut most businesses in the third quarter as the highly infectious delta variant sent caseloads skyrocketing, inundating hospitals and spurring a race to vaccinate a million people a day. GDP growth for July-September was 1.55% compared to the previous quarter on a non-seasonally adjusted basis, lower than the 1.9% seen by economists.
What Bloomberg Economics Says...
“Indonesia’s steep economic slowdown in 3Q keeps the country on track to underperform most of its Southeast Asian peers this year. Next year, though, should be different. Once Indonesia equalizes on vaccines -- by reaching a 70% vaccination rate deemed the minimum for returning to normal -- its demographics will become an advantage.”
-- Tamara Mast Henderson, Asian Economist
To read the full note, click here
Public activity and domestic tourism during the period declined both from a year ago and the preceding quarter, Margo Yuwono, head of the country’s statistics office, said in a briefing Friday. Meanwhile, the global economic recovery improved, including in trade partner countries, while commodity prices rose, he said.
While consumption and foreign direct investment stalled due to the outbreak, soaring prices of commodities have been a lifeline for Indonesia, a top exporter of coal and palm oil. Outbound shipments hit an all-time high in August, while the trade surplus surged to more than $4 billion in the third quarter.
Exports in the third quarter jumped 51% from a year ago to $61.4 billion, the statistics office said Friday, while imports rose 47% to $48.2 billion.
Southeast Asia’s largest economy expects the recovery to regain pace this quarter as the outbreak is brought under control and movement curbs are relaxed. Improved manufacturing activity and retail sales should add to export momentum and drive full-year GDP, which the finance ministry last month said it expects to grow at 4%. The government had earlier set a target range of 3.7%-4.5% for this year.
“Resurgent consumption alongside a strong export rebound should figure in a strong finish for the year,” ING’s Mapa said.
Bank Indonesia says it will keep its policy interest rate at a record low until the economy is on steadier footing, likely deferring any increase until late next year. The central bank also could maintain looser policy on down-payments for home and auto purchases until 2023 to spur lending.
(Updates to add new chart, analyst comment in third paragraph, market reaction in fourth paragraph, statistics office comment in sixth paragraph.)
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