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Indonesia Slips Into First Recession in More Than Two Decades

November 5, 2020 | 1:27 pm
A man takes a nap across BNI City train station in Jalan Sudirman, South Jakarta on Wednesday. (Antara Photo/Dhemas Reviyanto)
A man takes a nap across BNI City train station in Jalan Sudirman, South Jakarta on Wednesday. (Antara Photo/Dhemas Reviyanto)

Jakarta. Indonesia has fallen into a recession after the $1-trillion economy shrank for the second consecutive quarter in the July to September period, the statistics agency said on Thursday. 

The largest economy in Southeast Asia saw its output declined by 3.49 percent in the third quarter this year compared to the same period last year, the Central Statistics Agency (BPS) said. That was worse than the government's expectation for the third quarter contraction of 2.9 percent to 1.1 percent. 

Indonesia fell into a recession — which defined contractions in two consecutive quarters — as the economy had already contracted by 5.32 percent in the second quarter following the government's social and travel restrictions to curb the spread of the Covid-19 pandemic. This was the country's first recessions since the Asian Financial Crisis 22 years ago. 

Household consumption, which accounts for more than half of the economy, was still under pressure with a 2.17 percent decline. 


BPS head Suhariyanto said, "the increase in central government spending and transfers to regions and villages" had helped the economy avoid a deeper slump. 

The government spent Rp 771 trillion throughout the July-September period, including its economic stimulus program under the so-called Economic Recovery Program (PEN).

Investment and net exports also remained in a downward mode, sliding 2.1 percent and 2.3 percent respectively.

The second Covid-19 wave experienced by Indonesia's key economic partners in Europe dragged the recovery of investment and exports in Southeast Asia's largest economy, Suharianto said. 

"In several countries in Europe, Germany, France, Britain, and Austria are under lockdown again because of the increasing cases of Covid," he said.

The Investment Coordinating Board (BKPM) announced last month that investment — excluding those into the oil and gas and banking sector — rose 1.6 percent to Rp 209 trillion in the third quarter from the same period last year. Foreign direct investment increased 1.1 percent to Rp 106 trillion, BKPM data showed. President Joko "Jokowi," Widodo told his ministers on Monday to push investment and government spending in the fourth quarter. 

The information and communication sector were among sectors that still posted positive growth in the third quarter, alongside healthcare, water and garbage utilities, and agriculture sectors. 

Transportation and logistics shrank the most, down by 17 percent from last year, followed by hospitality sectors, which dropped by 12 percent. 

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