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Indonesia Tumbles Into First Recession for Two Decades

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Key Points

  • Indonesia’s virus-hit economy contracted in the third quarter, plunging it into its first recession since the archipelago was mired in the Asian financial crisis more than 20 years ago.
  • Indonesia last suffered a recession in 1999 during a regional currency crisis that helped force the resignation of long-term dictator Suharto less than a year earlier.
  • President Joko Widodo has been widely criticized over his government’s handling of the pandemic as it appeared to prioritize the economy.
  • Visit The Financial Today’s homepage for more stories.

JAKARTA — Indonesia’s virus-hit economy contracted in the third quarter, plunging it into its first recession since the archipelago was mired in the Asian financial crisis more than 20 years ago.

Activity in Southeast Asia’s biggest economy slumped 3.49 percent on-year in July-September, the statistics agency said Thursday, with tourism, construction, and trade among the hardest-hit sectors.

The data marked the second consecutive quarter of contraction after a 5.3 percent decline in April-June.

Indonesia last suffered a recession in 1999 during a regional currency crisis that helped force the resignation of long-term dictator Suharto less than a year earlier.

Governments around the world have been struggling to contain coronavirus as the deadly respiratory disease forced the shutdown of vast parts of the global economy. 

Indonesia’s central bank cut interest rates several times this year in a bid to boost the struggling economy, while the government has unveiled more than $48 billion in stimulus to help offset the impact of the virus, which forced a large-scale shutdown that hammered growth.

Several million Indonesians have been laid off or furloughed as the archipelago, home to nearly 270 million people, battled to contain the crisis. 

COVID-19 infections are still rising, however, with cases topping 420,000 and more than 14,000 deaths, putting Indonesia among the worst-hit Asian countries.

However, the true scale of the crisis is widely believed to be much bigger in Indonesia, which has one of the world’s lowest testing rates.

President Joko Widodo has been widely criticized over his government’s handling of the pandemic as it appeared to prioritize the economy.

Boosting annual growth above five percent had been a key priority for Widodo in his second term, which began late last year.

On Monday, the president signed into law a package of pro-business bills aimed at cutting red tape and drawing more foreign investment as he pushes an infrastructure-focused policy.

But the controversial legislation has sparked mass protests in cities across the nation, as activists warned it would be catastrophic for labor and environmental protections.

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