Indonesia: GDP now seen rebounding 4.0% in 2021 – UOB

UOB Group’s Economist Enrico Tanuwidjaja and Haris Handy give their views on the latest GDP figures in the Indonesian economy.

Key Quotes

“Indonesia Gross Domestic Product (GDP) contracted by -2.2% y/y in 4Q20 vs. 3Q20’s -3.5%, as the country struggled with the COVID-19 pandemic. The result was slightly better than the consensus forecast (Bloomberg at -2.3%) and in line with our pessimistic scenario.”

“For 2020, Indonesia economy fell by -2.1% from the previous year of +5.0%; marking the first fullyear contraction since the Asian financial crisis in 1998. The growth in government spending due to the stimulus program and stringer net exports contribution (help by the uptrend of exports commodity prices and imports contraction) prevented the economy from falling deeper.”

“Out of Indonesia’s top 5 contributing sectors to GDP (which comprise to 63.8% of GDP), agriculture came out as the most resilient sector in 2020 (others incl. manufacturing; wholesale and retail trades; construction; and mining). Meanwhile, information-and-communication, as well as human health-and-social work activities thrived during the pandemic.”

“We hold a more cautiously hopeful view that the Indonesian economy will pick up in 2021. We might see 1Q20’s growth to be weaker than our initial expectation, due to multiple rounds of public activity restrictions (“Pemberlakuan Pembatasan Kegiatan Masyarakat” – PPKM) which, again, hampers mobility level. Nonetheless, with a guarded hope of a more sustained recovery in Q2 onwards, we expect a +4.0% bounce in 2021 (from +4.3% previously); supported by the ongoing vaccination program that in turn will boost the consumer confidence level.”