Sri Mulyani: Calm Down, Indonesia Has Not Experienced A Recession Yet

Minister of Finance, Sri Mulyani. (Photo: Instagram @smindrawati)

JAKARTA - National economic growth in the second quarter of 2020 contracted minus 5.32 percent, compared to the first quarter which was able to grow positively at 2.97 percent. However, this condition does not necessarily lead Indonesia to enter the brink of recession.

Finance Minister Sri Mulyani explained that a new country can be said to be entering a recession phase if the realization of annual economic growth or year on year (yoy) contracts for two consecutive quarters.

"Usually, looking at the recession, we look at the year on year for two consecutive quarters," he said in a virtual press conference, Wednesday, August 5.

Sri Mulyani said that referring to the regulation, Indonesia cannot be said to have entered the brink of a recession like Singapore or South Korea. This is because, if viewed annually, the realization of Indonesia's economic growth has contracted only once this year.

"Actually, if we look at it from year on year, it hasn't been (recession), because this is our first contraction," he said.

Furthermore, Sri said, the government is committed to safeguarding the national economy in the following third quarter, so as to avoid the negative zone. So, Indonesia does not enter into a recession phase.

"If we can avoid the third quarter, God willing, we won't technically experience a recession," he explained.

This state treasurer said, Indonesia still has a chance to escape the economic recession. Sri Mulyani estimates that the national economy will still be able to reverse positive growth in the third quarter of 2020.

"In the third quarter, we still hope that the growth will be at least zero percent or positive at 0.5 percent, although there is a negative probability because the decline in some sectors will not recover quickly," he said.

Meanwhile, for the fourth quarter of 2020, the economy is estimated to be in the range of 3 percent. That way, economic growth for the whole of this year will be zero to 1 percent.

"Economic growth in 2020 is expected to be maintained in the positive zone," he explained.

As previously reported, Indonesia's economic growth in the second quarter was recorded at minus 5.32 percent. This figure has dropped compared to the same period last year where Indonesia's economic growth was 5.05 percent.

Indonesia's economic growth has also seen a decline since the first quarter. This is because in the first quarter of the world's largest economy, China experienced a very sharp contraction of minus 6.8 percent.

"This has an impact on Indonesia's economic growth. Trading partners and investment are heavily influenced by global and regional economic conditions, including the PRC's economy, which is drastically slow due to COVID-19," he said.