Take note! This afternoon RI’s Official Recession Announcement

Jakarta, CNBC Indonesia – The Central Statistics Agency (BPS) will announce economic growth data seen from the third quarter of 2020 gross domestic product (GDP) at 11:00 WIB, this Thursday (5/11/2020).

BPS previously announced a deep economic contraction in the second quarter of 2020. Economic growth in the second quarter of 2020 fell -5.32% compared to the second quarter of 2019 (year on year).

Meanwhile, on a quarterly basis or from the first quarter of 2020 to the second quarter of 2020 the Indonesian economy contracted -4.19% (QtQ).

Two consecutive contractions on a QtQ basis have arguably entered Indonesia into a technical recession phase. The reason is that in the first quarter of 2020 on a QtQ basis, Indonesia’s GDP was minus 2.41%. Cumulatively, during the first semester of 2020, the Indonesian economy was already minus 1.26%.

Suhariyanto, Head of BPS, said that the Covid-19 pandemic had an extremely bad impact.

“Creating a domino effect from health problems to socio-economic problems has impacted on all levels of society. Households, MSMEs, to corporations,” said Kecuk, Suhariyanto’s nickname, in a previous press conference.

After experiencing contraction (negative growth) 5.32% year-on-year (YoY), in the third quarter of 2020 it is also predicted to experience the same thing, so that Indonesia was legalized to experience a recession today, but how much economic contraction is still a mystery.

In general, a country is said to experience a recession if it experiences GDP contraction in two consecutive quarters on a year-on-year basis.

The market consensus collected by CNBC Indonesia estimates that the GDP of Mother Earth will grow -3.13% YoY in the period July-September 2020.

Then on a quarterly basis (quarter-to-quarter / QtQ), GDP is estimated to grow positively in the third quarter of 2020. It is even quite high, reaching 5.6%.

If it materializes, it will be the first growth in the last three quarters. Not only that, the growth of 5.6% will also be the highest since the third quarter of 1997.

This means that the economy in the third quarter of 2020 has begun to recover, it would be better if the second quarter of 2020.

Signs of economic recovery in the fourth quarter of 2020 are starting to appear. In October, which is the first month of the fourth quarter, Indonesia’s manufacturing activity improved as reflected in the purchasing managers’ index (PMI) figures.

IHS Markit reported that Indonesia’s manufacturing PMI score in October was 47.8. An increase compared to the previous month which amounted to 47.2.

Despite the increase, a PMI below 50 indicates that the business world is still not expanding. Instead, what happens is contractions.

In November, the manufacturing sector has the opportunity to expand again, because DKI Jakarta’s Large-Scale Social Restrictions (PSBB) have been relaxed. Although the recovery is predicted to be slow.

“The impact of the PSBB easing in mid-October will be seen in November. However, with the uncertainty about where the curve of the corona case will lead, further improvements will depend largely on the presence of the anti-corona virus vaccine. As long as there is no certainty, economic activity will still slow down in a few months. going forward, “said Bernard Aw, Principal Economist of HIS Markit, as quoted from a written broadcast.

The manufacturing sector is the main contributor to GDP in terms of business fields, therefore the re-expansion of the manufacturing sector will have a significant impact on GDP

Previously, the Ministry of Finance had projected that the GDP in the third quarter of 2020 would be between minus 2.9% and minus 1%.

President Joko Widodo (Jokowi) when speaking in front of the ranks of ministers in the cabinet plenary session, Jokowi said that economic growth in the third quarter of 2020 will be around minus 3%.

“Our estimate is at minus 3%, a slight increase,” said Jokowi at the State Palace, the Presidential Palace complex, Jakarta, Monday (2/11/2020).

Market participants already understand the occurrence of recession, because many countries experience it. The corona virus disease pandemic (Covid-19) forces the government to limit the activities of its citizens to quarantine (lockdown) to reduce its spread, the economic sector is sacrificed for health, but over time the economy and health begin to go hand in hand.

Here are some of the agenda and data releases scheduled for the day:

1. Indonesian GDP data release (11.00 WIB)
2. UK central bank monetary policy announcement (14:00 WIB)
3. US unemployment benefit claims data release (20:30 WIB)

The following are some indicators of the national economy:

RESEARCH TEAM CNBC INDONESIA

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