Indonesia’s economic growth is expected to remain in positive territory this year, albeit ever so slightly, as the coronavirus pandemic puts the global economy at risk of its worst recession since the Great Depression of 1930, according to the International Monetary Fund (IMF).
In its April update to the World Economic Outlook titled “The Great Lockdown”, the IMF lowered Indonesia’s GDP growth projection to 0.5 percent from 5.1 percent in its October projection.
“The significant downward revision to the 2020 growth projection reflects large anticipated domestic disruptions to economic activity from COVID-19,” the report says. The IMF expects the virus to hit Indonesia’s economy as the country relies heavily on the export of commodities rather than finished goods.
“Among developing economies, all countries face a health crisis, severe external demand shock, dramatic tightening in global financial conditions, and a plunge in commodity prices,” the report says. “They will have a severe impact on economic activity in commodity exporters.”
However, the IMF expects a recovery in 2021 as the country’s economy may expand by 8.2 percent, which would be the highest rate seen since 1995, during former President Soeharto’s regime.
The IMF also projects that the country’s unemployment rate will rise to 7.5 percent this year from last year’s 5.3 percent as the pandemic is upending supply chains, forcing companies to lay off employees and crushing demand for goods as consumers stay at home.
The global economy, according to the IMF, will contract by 3 percent this year, far worse than during the 2009 global financial crisis, as the pandemic put the global economy at risk of worst recession since the 1930 Great Depression.
The global economy is expected to grow by 5.8 percent in 2021, signaling a sharp rebound from this year’s recession.
Developed economies will contract by an expected 6.1 percent on average, with countries like the United States and Italy hit the most, contracting by 5.9 percent and 9.1 percent, respectively.
Meanwhile, emerging markets and developing economies like China, Russia and ASEAN-5 will contract by 1 percent on average. China, the first country to report the coronavirus outbreak and the center of global supply chains, will grow by 1.2 percent.
“It is very likely that, this year, the global economy will experience its worst recession since the Great Depression, surpassing that seen during the global financial crisis a decade ago,” IMF chief economist Gita Gopinath said. “Worse growth outcomes are possible and even likely.”
“This would follow if the pandemic and containment measures lasted longer, emerging and developing economies are even more severely hit […] or if widespread scarring effects emerge due to firm closures and extended unemployment,” she added.( JP / IM )