MacroInsight  /   Click here for full PDF version     
Author(s): Luthfi Ridho, Desty Fauziah

• 2Q20 GDP contracted by 5.32% yoy. This was due to drop in domestic demand during the large-scale social restriction measure.
• Transportation and hotel dropped by 31% and 22% yoy. Infocomm and agriculture seems more resilient (+10.9% & +2.2% yoy).
• We see economic activity to improve in 2H20 from PSBB relaxation and pick-up in government spending. We expect 0.2% growth in FY20F.

The impact of large-scale social restriction ( PSBB )
GDP growth contracted by 5.32% yoy in 2Q20 from +2.97% yoy in 1Q20. Slower growth in 2Q20 was due to contraction in consumption and investment by 5.73% and 8.61% yoy from +2.75% and +1.7% yoy in 1Q20. The contraction was largely due to large scale social restriction policy ( PSBB ) which significantly slowed down the overall economic activity. This was broadly in-line with our / consensus ( see our report here ) expectation of - 4.6% / -4.72% yoy. Separately, net-export recorded a positive growth due to higher contraction in imports at -17.0% yoy vis-a-vis exports at -11.7% yoy.
Transport and accommodation slumped, infocomm and agri were resilient
In terms of sector, transportation and hotel led the contraction by 30.8% and 22.0% yoy from +1.3% and +2.0% yoy respectively in 1Q20. This was broadly aligned with the decline in tourist arrival and hotel occupancy rate by - 60% yoy and -32.6% yoy in 2Q20. On the contrary, infocomm and agriculture recorded a higher growth by 10.9% and 2.2% yoy from +9.8% and +0.1% yoy in 1Q20. The increase in infocomm was due to the increase in internet data usage during the PSBB . Survey from the BPS suggested that around 40% of total household in Indonesia spent more (by 25- 50%) on the internet usage.
Expect a gradual recovery in 2H20 onwards
We believe the economy will still record a +0.2% growth for full year 2020. However, the improvement in economic activity will be relying heavily on the government spending realization (roughly 46% of target as of Jul20). We estimated that the government's economic recovery program (around Rp400tr or 2.5% of GDP) will boost the overall economic growth by around 2- 3% with the assumption of 6.34% fiscal deficit to GDP, ceteris paribus. At the same time, the gradual recovery from private sector needs to be supported with the right policy mix (i.e. credit insurance for the banks, lower interest rate for working capital). Combination of fiscal (lower tax rate, social aid spending) and monetary (lower interest rate, providing liquidity to the banking system) are imperatives to ensure successful economic recovery program.


Sumber : IPS