Jakarta, CNBC Indonesia – Recession is a scourge this year, not only in Indonesia, but in almost all countries in the world. A country is said to experience a recession if it experiences negative economic growth in 2 consecutive quarters on an annual basis (year-on-year/YoY).
In the second quarter of 2020, Indonesia’s gross domestic product (GDP) contracted (grew negatively) by 5.32% YoY. This means that if GDP in the third quarter of 2020 returns negative, Indonesia will legally experience a recession for the first time since 1999.
A recession seems certain, but how deep the economic contraction in the third quarter remains a mystery.
Finance Minister Sri Mulyani on Tuesday last week gave the latest projections for economic growth in the third quarter of 2020. But the projection is worse than before.
“The Ministry of Finance, which previously saw the economy in the third quarter of minus 1.1% to positive 0.2%, and the latest as of September 2020 is minus 2.9% to minus 1.0%. Negative territory in the third quarter will take place in the fourth quarter. “But we are trying to get closer to zero,” Sri Mulyani said at the press conference for our September State Budget, Tuesday (22/9/2020).
That means, a recession is certain.
But do not panic.
In economic cycles, recessions are common.
A country like the United States (US) has experienced 34 recessions, including this year.
US GDP in the second quarter of 2020 then negative 31.4% on a quarterly annual basis (quarterly annualized), while in the first quarter of 2020 it contracted 5%. Negeri Adi Kuasa officially experienced recession.
The US has even experienced something worse than the recession, namely the Great Depression (Great Depression) or a recession that lasted a decade, in the 1930s. But in the end the US was able to rise to maintain its status as a country with the largest economic value in the world.
What distinguishes this recession is the contributing factor, namely the corona virus disease pandemic (Covid-19) which has caused a health crisis. The virus, which originated in the Chinese city of Wuhan, has infected more than 35 million people worldwide. The US President, Donald Trump, has also tested positive for Covid-19 since last Friday.
In order to reduce its spread, governments in various countries have implemented social restriction policies (social distancing) to quarantine (lockdown). As a result, the wheels of the economy slowed down significantly, even almost suspended animation, unavoidable recession.
However, when the corona virus is successfully stopped from spreading, the economy will soon bounce back. China is a clear example, after successfully reducing the spread of Covid-19, the economy has risen, GDP in the second quarter of 2020 grew 3.2% year-on-year (YoY), while in the previous quarter it was negative 6.8%.
Especially with the development of the corona virus vaccine, giving optimism that the world economy will rise next year.
The government and the People’s Representative Council of the Republic of Indonesia have agreed that next year’s economic growth will be 5%.
Finance Minister Sri Mulyani Indrawati said the government would use all policies to restore the economy starting this year. Assistance through the National Economic Recovery (PEN) program will be maximized so that next year it can return to the original trend.
“We project it in the range of 5.0% and of course this is a recovery that must be pursued and maintained through various policies including the state budget,” he said through a virtual media briefing, Tuesday (29/9/2020).
“There are many things that are optimistic about the discovery and production of vaccines, including those from Indonesia as well as international cooperation,” he said.
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