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BI: Domestic economic growth expected to improve in second half

19 August 2020 15:01

JAKARTA - The improvement in domestic economic growth began to be indicated in July 2020 after experiencing contraction in the second quarter of 2020. Economic growth in the second quarter of 2020 contracted by 5.32% (yoy), compared to the achievement in the first quarter of 2020 of 2.97% (yoy).

Large-Scale Social Restrictions (PSBB) to prevent the spread of the COVID-19 pandemic have limited mobility of people and goods, which in turn reduces domestic demand as well as production and investment activities. Meanwhile, export contraction was not as large as predicted, driven by demand especially from China for several export commodities such as iron and steel, metal ores, and pulp and waste paper.

In second half of 2020, domestic economic growth is predicted to improve, driven by increased domestic demand in line with PSBB relaxation, increased realization of the State Budget as a fiscal policy stimulus, continued monetary policy stimulus, progress in credit restructuring and the business world, and the positive impact of the widespread use of digital media.

The developments in July 2020 strengthened indications of recovery in domestic demand, as reflected in the increase in early indicators such as community mobility, retail and online sales, consumer confidence and expectations of business activities.

The improving global economy also boosted the outlook for the external sector performance and national economic recovery. The positive performance of exports continued in July 2020, as reflected in the increase in exports of a number of commodities, such as iron and steel, and metal ores. (LM)

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