Indonesia's Q4 GDP shrinks more than expected, economy down 2.1% in 2020

ECONOMIC GROWTH - JAKARTA. Indonesia's gross domestic product fell slightly more than expected in the fourth quarter, tipping Southeast Asia's largest economy into its first full-year contraction in over two decades in 2020 as it grappled with the hit from the COVID-19 pandemic.

GDP shrank 2.19% on an annual basis in October-December, data released by the statistics bureau on Friday showed, faster than the 2% contraction expected in a Reuters poll, but improving from the 3.49% slump in the previous quarter.

Indonesia's main stock index erased its earlier gain after the data was released, having traded up as much as 0.7% before the announcement.

The economy fell into recession last year as it struggled to get its COVID-19 outbreak under control. The country has the highest caseload and death toll from the respiratory disease in Southeast Asia.

For 2020, GDP fell 2.07% from a year earlier, the first full-year contraction since the 1998 Asian financial crisis. That was slightly larger than the 2% contraction in a poll of analyst forecasts, and roughly in the middle of the government's forecast range for a 1.7%-2.2% fall. GDP grew 5% in the full-year of 2019.

As infections continued to surge, authorities imposed a second round of mobility restrictions in capital Jakarta between September and October last year, which analysts said had disrupted the economic recovery.

Household consumption, which makes up more than half of Indonesia's GDP, fell 3.6% on-year in the fourth quarter, moderating from the 4.1% drop in the previous quarter, while investment remained sluggish with a 6.2% fall.

Government spending was up just 1.8%, considerably slower than the previous quarter's 9.8% growth.

Both the central bank and the government have sought to soften the blow from the pandemic.

Bank Indonesia, which delivered 125 basis points of rate cuts last year and pumped $50 billion of liquidity into financial markets, has pledged to use all policy instruments to support the economic recovery in 2021.

Finance Minister Sri Mulyani Indrawati said this week she would boost fiscal support for the economy in 2021 to nearly match the 692.5 trillion rupiah ($49.39 billion) the government allocated for pandemic relief programmes last year.

($1 = 14,020.0000 rupiah)