Indonesia fell into recession this year for the first time since the Asian financial crisis in 1998 as COVID-19 shutdowns caused a sharp drop in consumption and investment expenditure, but “the worst is over” for Southeast Asia’s biggest economy, officials said Thursday.
Gross domestic product shrank by about 3.5 percent year-on-year in the third quarter, a slight improvement from the 5.32 percent year-on-year in the second quarter, which suggests the country is on a path to recovery, said Kecuk Suhariyanto, head of the Indonesian statistics agency.
“Even though the economy contracted 3.49 percent, it’s not as deep as in the previous quarter. This means that there is an improvement,” Suhariyanto said at a press conference, adding that GDP grew 5 percent in the third quarter from the second quarter.
The recession, defined as two consecutive quarters of a contraction in GDP, comes as Indonesia, the most populous nation in Southeast Asia, struggles to contain the pandemic. The archipelago-nation leads all countries in East Asia in the number of infections and deaths from the coronavirus, followed by the Philippines, which declared a recession earlier this year.
The number of confirmed COVID-19 cases in Indonesia rose by 4,065 on Thursday, taking the nationwide total to 425,796, according to Ministry of Health data.
Household consumption, which accounts for around 57 percent of GDP, declined 4 percent in the third quarter from a year ago, Suhariyanto said. The investment sector, which accounts for around 30 percent of GDP, shrank nearly 6.5 percent percent year-on-year in the third quarter.
These declines were in large part because pandemic restrictions caused a drop in demand and a decline in business activity, which also led to millions of people losing their jobs, analysts said.
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