Indonesia Economy in a Snapshot Q3 2020 Report

Economic Outlook

Against the backdrop of the COVID-19 pandemic, the smoothed CEIC Leading Indicator for Indonesia fell to 75.43 in June 2020, its lowest since April 2009. The non-smoothed indicator improved to 84.80 in June 2020 from 67.92 in May, but remained below normal. Both the smoothed and non-smoothed indicators have been indicating economic contraction since March 2020.

The seasonally-adjusted manufacturing purchasing managers' index (PMI) remained in the contraction zone from March-June 2020, plunging to a historic low of 27.50 in April. However, it began to improve in May and more so in June, reaching 39.10, as the COVID-19 containment measures were gradually eased.

The business survey carried out by Bank Indonesia (the central bank) shows a deeper contraction in realised business activity, with a weighted net balance of 35.75% in Q2 2020, down from 5.56% in Q1 2020. Respondents to the survey are predicting business activity will show the beginnings of a recovery in the third quarter of 2020 with a weighted net balance for business activity of 0.52% expected for September.

As the COVID 19 pandemic is continuing, its economic impact will remain significant, with the IMF predicting a substantial contraction of the Indonesian economy. According to its June 2020 update of the World Economic Outlook, the IMF predicts a decline for Indonesia’s real GDP in 2020 of 0.3%, which is less severe than the 4.9%downturn it predicts for the global economy. The World Bank projects economic growth of 0% for Indonesia in 2020, but with a rebound to 4.8% in 2021 and 6.0% in 2022.