Indonesia virus-hit economy posts first yearly contraction since 1998

JAKARTA (AFP) – Indonesia yesterday logged its first annual contraction since the 1998 Asian financial crisis, as the coronavirus pandemic slammed Southeast Asia’s biggest economy.

The country’s gross domestic product fell 2.07 per cent in 2020 from a year earlier, the statistics agency said, with household spending, transportation and tourism among the hardest-hit sectors.

Yesterday’s data marked the first time Indonesia’s economy contracted on a full-year basis since it was in the depths of the regional currency crisis which helped force the resignation of its long-term dictator Suharto in 1998.

“The COVID-19 pandemic has hit the whole world, including Indonesia,” said statistics agency chief Suhariyanto, who like many Indonesians goes by one name.

Indonesia has some of the worst virus infection rates in Asia, and President Joko Widodo has been widely criticised over his government’s handling of the pandemic, which appeared to prioritise the economy.

Shoppers buy fresh food at a market in Jakarta. PHOTO: AFP

Several million Indonesians have been laid off or furloughed as the central bank repeatedly cut interest rates in a bid to prop up the sagging economy.

The statistics agency chief said that some indicators, including trade data, showed signs of picking up last month.

The government, which rolled out a nearly USD50 billion stimulus plan, is forecasting the economy to expand by about five per cent this year. Indonesia has launched one of the world’s biggest mass vaccination drives.

“The vaccination programme and adherence to health protocols are important keys to an economic recovery,” Suhariyanto said.

But analysts warned that any recovery was likely to be slow as Indonesia moves to inoculate many of its nearly 270 million people, the world’s fourth-largest population.