Vivek Maishra

BENGALURU, (Reuters) – Indonesia’s third quarter economic growth was expected to slow down due to restrictions imposed by the Delta coronavirus variant to stop its spread. This poll from Reuters found.

After reporting annual growth of 7.07% in the second quarter https://www.reuters.com/world/asia-pacific/indonesia-exits-recession-with-7-gdp-growth-q2-virus-clouds-recovery-2021-08-05, the strongest in nearly two decades, southeast Asia’s biggest economy only grew 3.76% in the July-September period compared with the same three months a year earlier, according to the median forecast of 21 economists in the poll.

If realised, it would also be well below the latest government forecast https://www.reuters.com/world/asia-pacific/official-update-1-indonesia-sees-q3-gdp-growth-45-yy-warns-future-headwinds-2021-10-25 for the third-quarter growth of 4.5%.

The poll on gross domestic product growth (GDP), which will be published on Nov. 5, at 0400 GMT, showed that forecasts ranged between 1.6% and 5.2%. This underscores the uncertainty surrounding the economic impact of the pandemic.

Quarter-on-quarter, the growth rate was 1.80%, compared to 3.31% for the second quarter. This was based upon a small sample of forecasts.

Capital Economics’ emerging Asia economist Alex Holmes stated that the government had to increase its security measures in the last quarter due to the spike in viral cases. We expect the service sector to be particularly hard hit.”

He stated that even after the pandemic has ended, the crisis would leave behind a legacy consisting of increased debt, impaired balances, and bankruptcies, which will make it unlikely that GDP ever recovers its pre-crisis trajectory.

After a drop in coronavirus infections since July (when Indonesia was Asia’s COVID-19 hub), the lockdown restrictions have been gradually relaxed by the government. But, there is no guarantee that the country will be completely unaffected.

A third wave of COVID-19-related infections could be triggered by the approaching year-end holidays. The country’s resource-rich resources would be at serious risk if there is a decline in China’s economic growth.

The booming commodity demand is causing Indonesia to benefit from an increase in its exports. The accompanying jump in prices meant Indonesia’s trade surplus https://www.reuters.com/world/asia-pacific/indonesia-trade-surplus-shrinks-less-than-expected-september-437-bln-2021-10-15 was larger than expected in September, according to government data.

Economists believe that strong exports could help offset some of the economic damage caused by the pandemic.

Krystal Tan (an economist at ANZ) stated, “Economic activity started to recover after the easing in virus curbs on the later part Q3 with indicators such as loan demand, mobility and consumer confidence showing improvement.”

Tan explained that the good news is that Indonesia’s economy has been steadily recovering its feet and rising commodity prices have been a boon for the resource rich economy.

An increase in trade surplus could also be helpful to the country’s current account deficit. This will make its financial markets more resilient to capital outflows, and allow Bank Indonesia to maintain a accommodative monetary policy for longer.

The central bank is expected to keep its main policy rate unchanged at a record low of 3.50% until the third quarter of 2022, a separate Reuters poll https://www.reuters.com/world/asia-pacific/bank-indonesia-hold-rates-until-late-2022-awaiting-economic-resurgence-2021-10-15 showed.