Riska Rahman, Jakarta – Major lender Bank Mandiri expects Indonesia's economy to contract in the second and third quarter of this year following restrictions imposed on social and economic activities since April to contain the spread of the coronavirus.
The state-owned bank's chief economist, Andry Asmoro, said on Wednesday that he predicted the country's gross domestic product (GDP) to contract by 3.44 percent in the second quarter of this year, more than the government's projection of a 3.1 percent contraction.
"The biggest contraction will happen in the second quarter, because during that time, the government started to impose restrictions to contain the spread of COVID-19," he said, referring to the large-scale social restrictions (PSBB) enforced in several regions across Indonesia.
He went on to say that the contraction was expected to continue in the third quarter of this year, but at a much better rate, before a recovery would begin in the fourth quarter. Several regions have started to gradually phase out PSBB policies this month.
The easing restrictions was hoped to encourage more mobility among the public and drive economic activity, Bank Mandiri industry and regional research department head Dendi Ramdani added.
"Given such reasoning, we project that the contraction in the third quarter will reach 0.95 percent, before [the economy] bounces back to grow by 1.62 percent in the fourth quarter," he said.
The recovery in the fourth quarter, however, would only be possible if there was no second wave of the outbreak in the country, as another increase in the number of confirmed cases would only lead to a second period of PSBB and slow down the economy again, he said.
Should the recovery go smoothly, Dendi projected the country's economy would grow by 0.02 percent this year and by 4.43 percent in 2021. This compares with the government's baseline scenario of 2.3 percent economic growth and a 0.4 percent contraction under the worst-case scenario.
Indonesia has recorded 41,431 confirmed COVID-19 cases as of Wednesday, officially cementing its position as the country with the highest number of confirmed cases in Southeast Asia and surpassing that of Singapore, which recorded 41,216 cases.