Indonesia’s virus-hit economy contracted in the third quarter, plunging it into its first recession since the archipelago was mired in the Asian financial crisis more than 20 years ago.
Activity in Southeast Asia’s biggest economy slumped 3.49% on-year in July-September, the statistics agency said Thursday, with tourism, construction and trade among the hardest-hit sectors.
The data marked the second consecutive quarter of contraction after a 5.3% decline in April-June.
Indonesia last suffered a recession in 1998 and 1999 during a regional currency crisis that helped force the resignation of its long-term dictator Suharto.
However, the depth of the current decline was easing, the agency said, adding it pointed to stronger figures in the last quarter of the year.
The economy “continues showing a contraction year-over-year but the quarter-on-quarter recovery was quite strong,” said Anwita Basu, head of Asia Country Risk at Fitch Solutions in Singapore, highlighting a gradual pickup in manufacturing.
“Some government efforts to continue with public works is reflected in that,” she added.
Indonesia’s economy was also in better shape than two decades ago, with once-troubled commercial banks now stronger and ample foreign currency reserves at the central bank, Basu said.
Governments around the world have been struggling to contain the coronavirus, which has forced the shutdown of vast parts of the global economy.
Indonesia’s central bank cut interest rates several times this year in a bid to boost the struggling economy, while the government has unveiled more than US$48 billion in stimulus to help offset the impact of the virus, which forced a large-scale shutdown that hammered growth.
Several million Indonesians have been laid off or furloughed as the vast country, home to nearly 270 million people, has battled to contain the crisis.
Covid-19 infections have topped 420,000 and there have been more than 14,000 deaths, putting Indonesia among the worst-hit Asian countries.
However, the true scale of the crisis is widely believed to be much bigger in Indonesia, which has one of the world’s lowest testing rates.
President Joko Widodo has been widely criticized over his government’s handling of the pandemic, as it appeared to prioritize the economy.
Boosting annual growth above 5% had been a key priority for Widodo in his second term, which began late last year.
On Monday, the president signed into law a package of pro-business bills aimed at cutting red tape and drawing more foreign investment as he pushes an infrastructure-focused policy.
But the controversial legislation has sparked mass protests in cities across the nation, as activists warned it would be catastrophic for labor and environmental protections.