Indonesia’s GDP grew by 7% in the second quarter and exited the recession, but the virus casts a shadow over the recovery Reuters

© Reuters. Panorama of the skyline of Jakarta, the capital of Indonesia, August 5, 2021. REUTERS/Ajeng Dinar Ulfiana

Authors: Gayatri Suroyo and Fransiska Nangoy

Jakarta (Reuters)-Indonesia emerged from the recession in the second quarter after reporting its strongest annual growth rate in more than a decade, but analysts warned that its economic recovery will be due to the recent surge in COVID-19 infections. Suffered a setback.

Statistics Indonesia reported on Thursday that Southeast Asia’s largest economy grew by 7.07% year-on-year in the April-June quarter, the first expansion in five quarters.

According to data from Bank Mandiri, this growth rate is higher than the 6.57% growth expected in a Reuters survey of analysts, and is the highest level since the October-December 2004 quarter. The contraction rate in the first quarter was revised to 0.71%.

Statistics director Margo Yuwono said at the press conference that the transportation and storage and food and beverage industries have experienced the fastest growth, which is consistent with the increase in people’s mobility during this period.

However, he said that the high growth rate was also due to the low base effect compared to the weakness in the second quarter of last year due to the pandemic, and pointed out that countries such as Singapore and the United States have also reported similar patterns.

On a non-seasonally adjusted quarterly basis, the economy grew by 3.31%, compared with a revised decline of 0.92% from January to March. Analysts had expected 2.94%.

Indonesia’s gross domestic product (GDP) shrank by 2.1% last year for the first time since 1998, as its COVID-19 outbreak and liquidity restrictions to curb the coronavirus have affected almost all aspects of economic activity.

To help the economy tide over the crisis, the government spent tens of billions of dollars, while the central bank took unorthodox measures, such as directly financing the fiscal deficit to supplement its interest rate cuts.

However, due to the spread of the Delta variant, COVID-19 cases have surged since June, and the authorities have implemented a new round of restrictions since the beginning of July.

“This will inevitably have an adverse effect on the recovery process,” said Faisal Rahman, an economist at Mandiri Bank.

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