Sri Mulyani Gives Signals Indonesia Will Enter The Abyss Of Economic Recession

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

JAKARTA - Finance Minister Sri Mulyani projects that the highest economic growth in the third quarter of 2020 can only touch 0 percent. However, there is a chance that third quarter growth will fall into the negative zone if it fails to reach a neutral zero percent position and will enter the abyss of recession.

"In the third quarter, the outlook is negative 2 percent to 0 percent. The shift from movement has not looked very solid yet," he said, at a press conference for the KiTa State Budget in Jakarta, Tuesday, August 25.

This figure is relatively lower than the previous estimate on July 9. At that time, Sri Mulyani conveyed to the DPR that the third quarter of growth could still be maintained in the range of minus 1 to positive 1.2 percent.

The change in projection in the third quarter is in line with the projection of economic growth at the end of 2020 which is in the range of minus 1.1 percent to 0.2 percent. Sri said the estimated realization figure had taken into account the economic achievements in the second quarter which were minus 5.32 percent.

If Sri Mulyani's prediction is true, then Indonesia will finally enter the abyss of a technical recession, which is a contraction in growth for two consecutive quarters. Where in the second quarter of 2020 the Indonesian economy was at minus 5.3 percent.

"It is admitted that this is quite a challenge. Because in the third quarter, consumption has not shown the recovery as we expected, and we still have 1.5 months for this third quarter," he said.

However, even though the prediction shows a recession is in sight, Sri Mulyani said there are still several ways to save Indonesia from the brink of recession. According to him, as long as consumption which contributes 57.9 percent of GDP and investment or Gross Fixed Capital Formation (PMTB) of 32.3 percent of GDP can be maintained, the third quarter growth can reach zero percent and even positive.

"It really depends on the movement of consumption and investment from the domestic demand side. This is the center of our attention in the third and fourth quarters," he said.