ASEAN Beat | Economy | Southeast Asia

Pandemic Puts Indonesia Into 1st Recession in 20 years

After two quarters of contraction, Indonesia is officially in its first recession since the Asian financial crisis.

By Niniek Karmini for
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Pandemic Puts Indonesia Into 1st Recession in 20 years
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Indonesia’s economy has fallen into recession for the first time since the Asian financial crisis more than two decades ago as the country struggles to control the coronavirus pandemic. 

Statistics Indonesia, the central statistics agency, said Thursday that Southeast Asia’s largest economy contracted at a 3.5 percent annual pace in July-September, the second consecutive quarterly contraction. 

The economy shrank at a 5.32 percent pace in the previous quarter and grew 2.9 percent in January-March, its slowest rate in almost two decades.

Indonesia has reported more than 425,000 confirmed cases of COVID-19, the largest in Southeast Asia and second in Asia only to India’s 8.3 million confirmed cases. 

Air and train travel plunged as the pandemic prompted authorities to suspend nonessential services and close many offices to stem the spread of infections, said Suhariyanto, the agency head. He uses a single name. 

Suhariyanto told a news conference in the capital, Jakarta, that activity in the logistics and hospitality sectors also fell sharply as people stayed home and dined in.

A technical recession is defined as two straight quarters of contraction. Much of the region is in recession, with air travel nearly paralyzed due to border controls and other restrictions. Indonesia’s last recession was in 1997. It helped to hasten the ouster of dictator Suharto a year later. 

President Joko Widodo’s administration has sought to prop up the economy by easing taxes and spending more on social support and public health. 

The government approved a relief package worth 677.2 trillion rupiah ($47.9 billion) in June to revive the virus-battered economy. That was bigger than the 641.17 trillion rupiah ($45.3 billion) initially allocated in late April, but slow disbursement and outbreaks of the coronavirus are hindering a recovery.

“We continue to expect growth momentum to be subdued for the next few quarters as Indonesia struggles to get a hold of the coronavirus,” Nicholas Mapa of ING Economics said in a commentary. 

“We can expect household spending, the main driver of overall economic activity, to remain downbeat until COVID-19 cases dissipate or when effective treatments and vaccines are readily available to the public,” he said. 

Indonesia had reported more than 14,000 deaths from the coronavirus as of Thursday and has been adding 3,000-4,000 cases daily since mid-September.

United Nations agencies and other groups have warned that job losses and other shocks from the pandemic threaten to undo decades of progress in alleviating poverty in countries like Indonesia. 

By Niniek Karmini for the Associated Press in Jakarta, Indonesia.