Indonesia Recession, Will End in Crisis?

JAKARTA, KOMPAS.com – Indonesian official recession after the economy two consecutive quarters of contraction. In the third quarter of 2020 the economy was minus 3.49 percent, while in the previous quarter it was minus 5.32 percent.

Some parties also predict that this year’s recession will end crisis economics, however, economist from the University of Indonesia (UI) Fithra Faisal said a recession does not always lead to a crisis.

“So the recession does precede a crisis, but it does not always lead to a crisis,” he said at the Trijaya Polemic on Securities Recession in the Middle of a Pandemic, Saturday (7/11/2020).

Also read: Indonesia is officially a recession, this is the impact that will be felt by the community

He explained that the recession that occurred in the third quarter of 2020 was indeed the first time Indonesia had experienced it in the last 22 years or since 1998. But these two periods had different conditions.

During the 1998 crisis, the fundamentals of the national economy were indeed in a state of decline, followed by poor monetary and macroprudential conditions and inadequate fiscal capacity. So that at that time the minus economy reached 13 percent.

Meanwhile, this year, Indonesia’s monetary and fiscal conditions are equally well maintained. In fact, government consumption was able to support the economy in the third quarter of 2020 by growing 9.76 percent, being the only positive component.

Therefore, said Fithra, currently the Indonesian economy is starting to show recovery. It appears that the contraction is getting smaller, especially when compared to quarterly, namely between the second quarter of 2020 to the third quarter of 2020, the economy grew by 5.05 percent.

He also predicted that the Indonesian economy will be increasingly active in the next year, in line with the economic recovery that is starting to occur.

“This is just a technical recession, next year there will be another technical bounce. So the economy will return to normal, which tends to be very possible,” he said.

Meanwhile, Special Staff to the Minister of Finance, Yustinus Prastowo, said that the economy in the third quarter of 2020 is expected to be a turning point in economic recovery. According to him, a number of economic indicators have also improved at this time.

He assessed that the various efforts and policies undertaken by the government to deal with Covid-19 and the economic recovery were running correctly or on track. Therefore, it is hoped that in the future the economy will be more active.

“The bureaucracy works efficiently and effectively, as evidenced by the side of government spending that grew well in the third quarter. And it is hoped that with better acceleration in the fourth quarter, this will be a precondition for the 2021 economy,” said Yustinus.

Also read: Lockdown Again, UK Will Return to Recession?

– .