Indonesia: Economy contracted in Q1 – UOB

Economist at UOB Group Enrico Tanuwidjaja and Haris Handy review the latest GDP figures in Indonesia.

Key Quotes

“Indonesia’s economy contracted for the fourth straight quarter, albeit at a much more modest pace. The economy fell by 0.74% y/y in 1Q21 vs. 4Q20’s -2.19%, dragged by the mobility restrictions that remained in place.”

“In 1Q21, solid performance in investment, trade and government expenditure have been the main growth drivers.”                                           

“The 1Q21 GDP result is only a hairbreadth away from our projection. Nonetheless, this early setback might derail some of 2021’s recovery prospect. While we saw the recovery momentum from other contributors (mainly from net exports, government consumption, and investment), the improvement on Indonesia’s economy main contributor, the private consumption, proved to be marginal rather than a strong rebound. With much still to be done and the unfortunate emergence of more downside risks (i.e., new COVID-19 variant and slow pace of vaccination program), we are revising our 2021 baseline growth forecast lower to 3.8% (from 4.0% previously). On an optimistic side, full year growth of 4.0% - 5.0% might still be within reach if Indonesia managed to smoothen the transition on economic reopening (with no huge spike in COVID-19) and speed up the vaccination program.”