Indonesia Sinks into Recession

By Samantha Bader

The largest economy in South East Asia is the latest to fall prey to the economic impacts of the COVID-19 pandemic. Indonesia has officially entered its first recession in twenty-two years. In the third quarter of 2020, the GDP contracted by 3.49%, compared to the third quarter of 2019. This comes after GDP declined 5.3% in the second quarter of the year. 

Indonesia was particularly affected by COVID-19, as in an effort to slow the spread and protect its citizens, the government shut the border to non-residents. This decimated one of the most important industries in Indonesia, as tourism completely ground to a halt. Millions of people every year fly to Indonesia to visit Bali and the surrounding islands. Without this income, it was inevitable that the economy would contract. Other hard-hit sectors include the construction and trade sectors. 

Indonesia has also done a poor job of containing the COVID-19 outbreak. Cases have topped 420,000 and there have been 14,000 deaths due to the virus. The true numbers are expected to be a lot worse, however, as the country has an incredibly low testing rate. President Joko Widodo has been criticized by people who believe that his government placed more emphasis on saving the economy than they have on public health. With this latest news, it appears as though they have been unable to do either successfully, especially when one looks at the millions of Indonesians who have either been furloughed or fired this year. 

The government has taken numerous actions in order to try and stop this economic collapse from worsening. Indonesia’s central bank cut interest rates several times this year in a bid to boost the struggling economy.  They also provided more than US$48 billion in stimulus to try and aid businesses and citizens who were suffering. Then on Monday, November 2nd, the president announced a new labour bill focused on making it easier for companies to operate and draw on foreign investments. Unfortunately, this was met with large scale protests from citizens who think this bill will cause the decimation of labour and environmental protections across the nation. 

The Indonesia officials also believe that there are some positive signs of growth. GDP expanded 5.05% in the three months through September, while economists expected 5.55% growth when compared to the previous quarter. This indicates that the economy is recovering slightly. After multiple economic forecasts, the government is now predicting a GDP contraction of only between 0.6% and 1.7% for all of 2020. 

“This shows improvement, and the direction is getting more positive,” said the head of the statistics bureau, Suhariyanto, who goes by just one name. “We hope that the fourth-quarter situation will be even better with the easing of large-scale social restrictions.”

Indonesia is hoping to end the year strong. If they can get a handle on the number of COVID-19 cases in the country and ease the restrictions on businesses and social gatherings, they will be able to see some economic growth as 2020 draws to a close. Sadly, as things stand right now, Indonesia is another country added to the list of struggling nations at this time.

Photo by Ali Yahya, Unsplash

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