MacroInsight / Click here for full PDF version
Author: Luthfi Ridho
- During the outbreak, Indonesia GDP may be hit by as much as -0.5% in 2020, however during the recovery period GDP may pick-up by 0.7%.
- Transmission of the outbreak to Indonesia will through exports, FDI and tourism. We argue that China's recovery will be stronger.
- We acknowledge that the recovery timeline will be debatable. In our simulation, economic growth may bottom in Q2 before slowly picking-up.
Impact to Indonesia GDP during outbreak: -0.5%
The coronavirus epidemic may directly impact Indonesia's economy via: 1) lesser exports, 2) potential delay in FDI and 3) lower tourism revenue. We estimate the overall impact will be c.-0.5% with export will drop the most (c.- 2%) followed by investment (-0.6%) and to lesser extent consumption (- 0.1%). In terms of sector, hotel and restaurant (-6.6%), mining (-6.5%), manufacturing (-5.6%), transportation (-5.4%) and construction (-2.5%) will be the most affected sectors. The sizable impact to Indonesia's economy is due to sizable investment and trade activity with China (c.17%)
The aftermath: strong recovery
We believe China economy will come stronger in the aftermath compared to pre-virus economic situation. The nation's production activity will be doubled to fill empty stores and increase the nation's inventory level. People will start to work again and situation will be normalized. Implicitly, we argue the recovery process will be stronger to offset the negative impact during the outbreak. We estimate +0.7% economic recovery in 2021 largely from pickup in exports (+7%) and investment (+0.5%). By sector, transport (+7.4%) along with hotel and restaurant (+7%) and mining (+4.5%) shall be the main drivers
Risk is recovery timeframe; faster recovery with some government's induced stimulus
We acknowledge the risk to our estimates remains with the recovery timeframe. In our simulation, we think the outbreak will result in bottoming economic growth in Q2 before slowly picking-up (figure 12). Delta positive economic growth will be in Q5 onwards. Note that our estimates have not taken into account any government stimulus by both Chinese and Indonesian governments. If there will be some stimulus, it's safe to assume a faster recovery period.
Sumber : IPS
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