Economy of Indonesia; Latest World Bank Report Makes Indonesians Fear a Looming Recession
In early September 2019 the World Bank released a report titled Global Economic Risks and Implications for Indonesia that paints a somewhat negative picture of Indonesia’s economic growth in the foreseeable future. The Washington-based institution noted that it expects Indonesia’s economic expansion to continue slowing up to (at least) 2022; from a realized growth pace of 5.2 percent year-on-year (y/y) in 2018 to 4.6 percent (y/y) in 2022.
Apparently, this World Bank report caused some panic in Indonesia. Various Indonesian media institutions (including television channels and newspaper/magazine articles) have reported about the threat of a looming recession for the Indonesian economy. Personally, I find this odd since the Indonesian economy has been growing at a pace of around 5 percent (y/y) over the past couple of years and Indonesia’s open unemployment rate had fallen to 5.01 percent in the first quarter of 2019 (which is some 6.82 million unemployed Indonesians in absolute numbers), and which is the lowest unemployment rate in the post-Suharto era. But perhaps not everybody knows what a recession is.
Therefore, when a CNBC Indonesia news reporter asked my opinion about the threat of a looming recession for Indonesia, I first asked whether she knows what a recession actually is. She replied “when there are two straight quarters of negative economic growth”. And while many may hold a broader definition of ‘recession’ (by not only looking at negative GDP growth but also including a nation’s unemployment rate, manufacturing activity, and retail sales), I was surprised that she had a decent picture of what a recession is. My next question was “do you really think that – even amid these challenging international conditions – it is possible for Indonesia’s economic growth to suddenly drop from above 5 percent to below zero, and stay there for two consecutive quarters?” She replied “well, the head of our department said a recession is a real threat based on a new World Bank report, and therefore we are making a story about this topic”. [...]
Author: R.M.A. van der Schaar, Managing Director Indonesia Investments
This article discusses:
- The latest World Bank report
- It is really possible for the Indonesian economy to experience a recession?
- An update about the health of Indonesia's economy
- and more ...
Read the full article in the September 2019 edition of our monthly research report. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
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