Indonesia Q2 GDP grows but new wave hurts outlook

JAKARTA- Indonesia is expected to report this week an economic growth of more than 6 percent in the second quarter, but a new wave of COVID-19 cases, which started to hit in June, is clouding the outlook for subsequent quarters, a Reuters poll showed on Tuesday.

The median forecast of 22 analysts in the poll was for gross domestic product (GDP) growth of 6.57 percent in April-June on an annual basis, the first expansion in five quarters.

That is also the fastest clip since 2010, albeit less optimistic than the government’s projection of 7 percent and the central bank’s estimate of 6.75 percent.

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Southeast Asia’s biggest economy shrank 2.1 percent last year, the first contraction since 1998, as the pandemic hit consumption and investment. It was still weakening in the January-March quarter, contracting 0.74 percent year-on-year.

Analysts said the rebound forecast for the second-quarter was based on a range of positive data, including rising car, motorcycle, and cement sales, record highs in a purchasing managers’ index, as well as surging exports.

However, some said the forecasted high growth rate was mostly a result of the base effect as economic activity plummeted when the pandemic first struck Indonesia in the second quarter last year.

Bank of America analyst Mohamed FaizNagutha described his 7 percent growth forecast as “underwhelming” and noted that on a quarterly, seasonally adjusted basis, “GDP is likely to remain flat to slightly up” compared with January-March. – Reuters

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