A commuter train passes through as the skyline is seen in downtown Jakarta on April 14, 2020. (BAY ISMOYO / AFP)
Indonesia’s latest official data have shown that the nation’s economy has been recovering. Still Jakarta-based Arian Mulyadihas concerns about his company’s future.
The businessman says his firm, which is involved in import and distribution of electrical goods, has yet to see any impact from the purported economic rebound, in terms of a boost to the bottom line.
“I still cannot predict what will happen with our business in the next few months. This is because many government projects have stopped, and we still do not see (any new investments from the) private sector,” Mulyadi said.
Meanwhile, HW Yohanes, an accountant by profession, is wary of leaving his house as some of his colleagues had contracted the coronavirus. The accounting professional said he normally prefers to work in the office, but is avoiding it now due to the virus.
Also, he said he understands the government’s decision to impose lockdown measures, which came in the wake of a recent surge in COVID-19 infections in the country.
Analysts say they are not sure if the second-quarter rebound can be sustained for the rest of the year, given the resurgence in COVID driven by the highly-infectious Delta variant of the virus
The cautious outlook of Mulyadi and Yohanes reflect the arduous road ahead for Indonesia’s recovery — and how the authorities have to balance the conflicting demands of public health and the economy.
Southeast Asia’s biggest economy has officially exited recessionas its GDP expanded 7.07 percent in the April-June period, according to data released on Aug 5.
It marked the first positive growth in five quarters, and came on a low base last year when the economy was severely stricken by the pandemic.
Analysts say they are not sure if the second-quarter rebound can be sustained for the rest of the year, given the resurgence in COVID driven by the highly-infectious Delta variant of the virus.
Lockdown measures, which were supposed to end on Aug 9,have been extended until Aug 16, and there is the possibility that they could be stretched even longer depending on the situation.
ALSO READ: Philippines, Indonesia seek to shore up economies via tax reforms
Movement restrictions will crimp business activity and dampen consumption, hurting the economy.
Sanjay Mathur, chief economist for Southeast Asia and India at the Melbourne-based ANZ Bank, said while the second-quarter data imply that Indonesia has exited recession, it does not indicate a long-term trend.
He pointed out that the GDP figure benefited from a low-base effect as the economy contracted 5.3 percent in the second quarter of 2020.
Paramedics tend to people at an emergency tent erected to accommodate a surge of COVID-19 patients at a hospital in Bekasi, on the outskirts of Jakarta, Indonesia, July 10, 2021. (ACHMAD IBRAHIM / AP)
“The data also came prior to the latest wave of the pandemic and therefore, does not incorporate the movement restrictions that have been imposed,” Mathur said.
Our sensitivity analysis suggests that if these (movement) restrictions end in August, then our GDP forecast for 2021 remains at 3.4 percent. Should (the restrictions remain in) the third quarter, then Indonesia may head into a double-dip growth trajectory, closing the year with 2 percent growth.
Wisnu Wardana, economist at Bank Danamon Indonesia
ANZ Bank has trimmed its 2021 economic growth forecast for Indonesia to 3.8 percent from 4 percent.
Wisnu Wardana, economist at Bank Danamon Indonesia, one of the country’s biggest commercial banks, said movement restrictions can limit the pace of the country’s economic rebound.
“Our sensitivity analysis suggests that if these restrictions end in August, then our GDP forecast for 2021 remains at 3.4 percent. Should (the restrictions remain in) the third quarter, then Indonesia may head into a double-dip growth trajectory, closing the year with 2 percent growth,” Wardana said.
Indonesia is battling one of Asia’s worst COVID-19 outbreaks, with nearly 3.75 million cases detected as of Aug 11, according to the World Health Organization. The virus has killed over 112,000 people in the archipelago and has strained the country’s public health system.
The Indonesian government has moved to contain the spread of the virus by launching a vaccination program and imposing emergency community measures in the more populous islands of Java and Bali.These two islands are home to more than half of the country's population of 270 million.
ALSO READ: Indonesia: COVID-19 deaths for unvaccinated over 3 times higher
But on Aug 9, Indonesian senior minister Luhut Pandjaitan said that some restrictions will be eased in the capital city of Jakarta and the Javanese cities of Bandung, Semarang and Surabaya.
A man receives a shot of the AstraZeneca vaccine during a mass coronavirus vaccination in Jakarta, Indonesia on June 9, 2021. (TATAN SYUFLANA / AP)
Aldian Taloputra, senior economist for Indonesia at UK-based banking group Standard Chartered, said vaccination together with the stringent implementation of health protocols, and expanding testing and tracing can accelerate the full reopening of the Indonesian economy
Shopping malls and offices were allowed to reopen in these four cities but at alimited capacity.Those who have been vaccinated can go to the shopping malls but they need to have vaccination cards and install a tracing app in their smartphones. People under the age 12 and above age 70 are still not allowed to go into shopping malls.
Aldian Taloputra, senior economist for Indonesia at UK-based banking group Standard Chartered, said vaccination together with the stringent implementation of health protocols, and expanding testing and tracing can accelerate the full reopening of the Indonesian economy.
“If one million doses will be delivered per day (versus around 800,000 doses currently), the 70 percent (herd immunity) will be reached in the second quarter of 2022,” Taloputra said.
Indonesia's vaccination program was launched in January with the aim of inoculating 181.5 million people this year. As of Aug 11, over 52 million Indonesians have received their first dose of vaccine, according to the nation’s health ministry.
Taloputra expects more people to get vaccinated in the coming weeks as the government focuses on inoculating people in large, densely populated cities which also have better infrastructure.
Requiring people to present proof of vaccination to access public places and facilities can help curb vaccine hesitancy, he said.
READ MORE: SE Asia internet economy on verge of post-pandemic boom
Wardana of Bank Danamon is also hoping that the pace of vaccination will improve in the next few weeks, noting that mass-immunizations will restore “hope and confidence— two factors that are vital in driving people to spend”.
“The most important benefit of vaccinations is that it reduces the severity of the disease and therefore, reduces the need for strict lockdowns,” Mathur of ANZ said.
prime@chinadailyapac.com
Leonardus Jegho, a freelance journalist for China Daily in Jakarta, contributed to this report.