Confounding the expectations of absolutely no one, Indonesia has officially entered a recession amid months of sluggish economic performance caused by the pandemic.
The National Statistics Agency (BPS) today officially announced that Indonesia’s GDP contracted by 3.49 percent in Q3 2020, following the 5.32 percent contraction in Q2 2020. A country is in recession when it records negative GDP growth in two successive quarters.
This is Indonesia’s first recession since the 1998 financial crisis.
Indonesia recorded a 2.97 percent GDP growth in Q1 2020, a significant slump from the steady growth of around 5 percent it enjoyed throughout 2019. The country recorded its first official COVID-19 cases in March.
While the government knows that Indonesia was always heading towards a recession during the pandemic, it outlined steps for economic recovery after BPS made the recession official today.
“When the economy is down, government spending can be relied on to boost the economy,” said Edy Priyono, a special staffer at the Presidential Staff Office, said today following BPS’ announcement.
Edy said the government has to continue providing stimulus checks to citizens in order to boost household spending, particularly among the middle and upper-middle classes. He noted that Indonesia is on track for economic recovery considering its Q3 contraction was not as deep as Q2.
Edy added that Indonesia’s recession is not as alarming as other countries affected by the pandemic, using the example of Singapore, which is expected to record a 7 percent full-year GDP contraction this year.
In a bid to spur economic growth, the government also recently ratified the Job Creation Law, which is expected to create jobs and draw investment, but has been widely criticized over its potential to erode workers’ rights and damage the environment.