Indonesia’s economy grew 7.07% in the April-June quarter from a year earlier, Statistics Indonesia said on Thursday. It was the first expansion in five quarters for Southeast Asia’s largest economy, and the fastest pace since the October-December quarter of 2004.
Analysts in a Reuters survey had expected 6.57%. The agency also revised the first quarter’s contraction to 0.71%.
Exports surged, with commodity shipments up 56%. Consumption and investment rebounded, and the government spent more. Household consumption, which makes up over half of GDP, grew 5.9%. Transportation and warehousing, along with food and beverage, posted the biggest gains as people moved around more. Exports as a whole jumped nearly 32% on the year.
The statistics bureau pointed out one caveat. Part of the high figure comes from low base effects, since the same quarter in 2020 was weak after the pandemic hit. Measured against the previous quarter without seasonal adjustment, the economy grew 3.31%, against a revised 0.92% drop in January-March. Analysts had forecast 2.94%.
A new wave of infections
Good numbers did not stop forecasters from cutting their outlooks. The virus has come back, and mobility restrictions have been in place since July.
On Wednesday, Indonesia passed 100,000 COVID-19 deaths, with 3.53 million people infected. Health experts believe the true counts are much higher.
David Sumual, chief economist at Jakarta-based Bank Central Asia, expects the anti-virus measures to pull third-quarter growth down by 0.6 point to 3.5%. He lowered his full-year estimate to between 3.6% and 3.7%, from 4.5% before the new wave. “We won’t completely return to pre-COVID-19 levels” this year, Sumual said.
Bank Mandiri cut its 2021 growth outlook to 3.69% from 4.43%, according to economist Faisal Rachman. The central bank had already trimmed its projection to a range of 3.5% to 4.3%, down from 4.1% to 5.1%. That sits slightly under the government’s 3.7% to 4.5%.
Faisal said strong demand for Indonesian commodities could soften the blow. A few analysts warned of a double-dip recession if the curbs run longer.
Restrictions and relief
The stay-at-home order covers designated areas across the archipelago, including much of Java and Bali. It has been extended until at least August 9, and authorities are eyeing a September reopening. For now only essential and critical sectors operate, at varying capacity.
The economy shrank 2.1% last year, its first contraction since 1998, as the virus and efforts to contain it hit nearly every part of economic activity. The government has spent tens of billions of dollars to cushion the damage. The central bank slashed interest rates and took unorthodox steps, including directly financing the fiscal deficit. Governor Perry Warjiyo of Bank Indonesia has pledged to keep policy loose for longer, and the government has promised to expand welfare programs and extend tax breaks.
