Indonesia's Economic Contraction Is Assessed Better, Economist: Who Said? Still In How

Economic observer from the Indonesian Center of Reform on Economic (Core) Mohammad Faisal. (Photo: Antara)

JAKARTA - Economic observer from the Center of Reform on Economic (CORE) Indonesia, Mohammad Faisal, assessed that Indonesia's economic contraction in the third quarter of 2020, which reached 3.49 percent, was still quite deep, even though during that period Large-Scale Social Restrictions (PSBB) had been relaxed.

"I thought the contraction was not that deep even though it was better than the second quarter, but the second quarter fell due to tightening," said Mohammad Faisal as quoted by Antara, Thursday, November 5.

According to him, the realization of this growth needs to be noted because the tightening in the PSBB has been relaxed but the economy has not been able to experience significant changes.

"This means that the potential in the future could be in a few quarters, we will still experience contractionary growth," he added.

He added that in order for economic growth to be positive, the economy had to be driven by consumption, especially the middle and upper class, who were considered still holding back spending.

For this reason, he continued, the big homework that must be tackled is dealing with the pandemic because as long as there is an increase in COVID-19 cases, the consumption of the middle and upper economic community will remain restrained or delay spending.

Meanwhile, related to the realization of the National Economic Recovery (PEN) expenditure, he said, it was intended to provide resilience to the affected communities, not to create positive economic growth.

"PEN is not intended to create positive economic growth. That is so that it does not fall further, the poor and unemployment do not increase, but to encourage a positive economy, the economy must move, driven by consumption, especially the middle to upper class," he added.

Previously, the Head of the Central Statistics Agency (BPS) Suhariyanto revealed that the Indonesian economy in the third quarter of 2020 contracted 3.49 percent (year on year / yoy).

Thus, Indonesia is officially experiencing a recession like that experienced by various countries affected by COVID-19, because for two consecutive quarters it has experienced negative growth.

BPS noted a contraction in the Indonesian economy in the second quarter of 2020, namely 5.32 percent in the second quarter of 2020 because the COVID-19 pandemic had limited economic activity.