Indonesia Eyes Growth Rebound With Exit From Virus Lockdowns

(Bloomberg) -- Indonesia’s move to gradually ease social distancing rules amid a record surge in coronavirus infections is to ensure an early recovery in Southeast Asia’s largest economy, according to a senior minister.

With the government allowing nine major sectors including mining, plantations, construction and industry to operate under a new health protocol, the country may post 0.5%-1% growth in the third quarter, rebounding from an estimated 2%-3% contraction in the preceding three months, National Planning Minister Suharso Monoarfa said. Growth may further accelerate to 3% in the fourth quarter for a full-year expansion of 1%-1.5%, he said.

Indonesia began to reopen some businesses this week to revive an economy ravaged by the pandemic that’s left millions of people jobless and a large number of businesses on the brink of collapse. The move to exit from strict social distancing rules, including in capital Jakarta, has come amid a spike in new cases, with some analysts saying the strategy may trigger a second wave of infections.

Monoarfa defended the push to restart the economy, saying the government was implementing a dual policy that sought to control the virus’s spread and at the same time accelerate an economic recovery while following the new health protocols.

“With the dual policy where we restore health and the economy together, we can see economic recovery to occur in a V-shape,” Monoarfa said in a phone interview on Tuesday. “We are already in the transition phase to the new normal.”

Jokowi Warning

The minister’s forecast for a pick up in growth echoes estimates from the central bank and the finance ministry. Finance Minister Sri Mulyani Indrawati has said growth will be below its target of 2.3% with a 0.4% contraction seen as a possibility under a worst-case scenario.

Read: Indonesia Sees Weaker Growth, Bigger Fiscal Gap Amid Virus

President Joko Widodo said the decision to reopen regions must be carefully weighed against data and gradual to avoid a second wave of infections. The government won’t hesitate to reimpose restrictions in the event of a resurgence in new cases, Jokowi, as Widodo is known said, urging people to adapt to the new normal until a vaccine become available.

While capital Jakarta began easing a partial lockdown this week with the opening of offices, retail stores and restaurants with a 50% capacity, the government said on Monday 136 cities or regions can start preparing for a return to normal and productive activities as the infection rate falls.

Record Cases

The country reported a record spike in infections for a second day running as it stepped up virus testing. There were 1,241 new cases on Wednesday, taking the total to 34,316 with 1,959 people succumbing to the disease so far, official data showed.

“Indonesia is expected to record positive growth this year despite the economic activity still running at half the capacity,” Monoarfa said. “The key to economic recovery lies in the return of normal productivity of industrial sectors, both small, medium industries and corporations.”

The government has earmarked 677.2 trillion rupiah ($48 billion) for virus relief and scrapped a fiscal deficit ceiling to facilitate bigger spending to cushion the economic impact of the pandemic. A rally in the nation’s currency, bonds and stocks pointed to the confidence of investors in the government strategy, he said.

‘With the recovery plan prepared by the government and its willingness to share the burden with the monetary authority, recovery in the real sector will also be achieved soon,” Monoarfa said.

©2020 Bloomberg L.P.