For Indonesia the subsequent economic recession started in Q2-2020 with negative economic growth touching a whopping 5.32 percent year-on-year (y/y). However, in following quarters we saw the situation gradually improving (see table below).

There are a number of reasons why there occurred an improvement (in the form of an easing economic recession). Most notably, the social and business restrictions were toughest in Q2-2020 when the COVID-19 pandemic really started in Indonesia. When these restrictions somewhat eased in the following quarters it provided some room for a higher degree of economic activity (albeit remaining far from the ‘normal’ levels of economic activity seen in the pre-COVID-19-crises times).

Moreover, fear somewhat eased. At the beginning of the pandemic the World Health Organization (WHO) even stated that COVID-19 has an infection mortality rate (IFR) of between 3 and 4 percent. That is indeed scary, and so people preferred to stay at home rather than going outside. When people, perhaps subconsciously, noticed that almost all who contract a COVID-19 infection survived the virus, while the WHO’s IFR was cut to around 0.2, people also became more confident to go out again (which is reflected by a rebound in various economic indicators). Possibly, the vaccination program of Indonesia that started in mid-January 2021 also helped Indonesians to regain some confidence (although renewed confidence based on the immunization program would – for now – not be based on facts or evidence).

And so, the economic recession should end for Indonesia in Q2-2021 (partly thanks to the low base effect as the crisis had peaked for Indonesia in Q2-2020). Earlier, Indonesia Investments set its projection for Indonesia’s Q2-2021 economic growth at a modest +3.50 percent (y/y). However, after we received the latest retail sales, consumer confidence, and manufacturing PMI data of Indonesia, we felt a revision was needed as household consumption seems to have recovered quicker, and better, than expected. Retail sales, for instance, rebounded 15.6 percent (y/y) in April 2021 (the first month of the second quarter), effectively ending the country’s 16-month-retail-sales-contraction streak. This rebound, partly, comes on the back of the so-called Ramadan effect (followed by Idul Fitri celebrations) when consumption tends to peak). While these celebrations were still modest in 2021 (due to restrictions and a travel ban) compared to normal years, they were, at least, better than in 2020. And so, for Q2-2021 we revised our forecast for Indonesia’s economic growth from 3.50 percent (y/y) to the range of 4.0–5.0 percent (y/y). Next month – typically around 5 August – we expect Indonesia’s Statistical Agency (or BPS) to release the official GDP data.


Order our June 2021 report to read the full article. This report can be ordered by sending an email to or a message to +62.882.9875.1125 (including WhatsApp).

Price of this (electronic) report:

Rp 150,000
USD $10,-
EUR €10,-

Take a glance inside the report here!