Our View on 2Q21 Indonesia GDP
• We see Indonesia’s economy to expand in 2Q21 (+3.23% QoQ/+6.95% YoY) for the first time after dipping into a recession in the last four quarters, thanks partly to a low based effect (-5.32% YoY in 2Q20).
• Looking at high frequency data released in 2Q21 was encouraging. We witnessed improving public mobility along with macro data figures.
• International trade surplus is likely to support the idea of a positive GDP growth. Indonesia recorded a trade surplus of USD5.97bn in 2Q21.
• Consumption started to improve as retail sales grew by a double digits in April-21 (+15.6% YoY) and May-21 (+14.7% YoY) although it is expected to decelerate in June-21 (+4.5% YoY).
• Better consumption figure was also supported by Ramadan Festivities and Eid ul Fitr in April and May which we believe THR disbursement to likely bolster household consumption.
• Consumer confidence also stayed above 100 points during the period reflecting a better consumer sentiment.
• Manufacturing activity consistently on its expansionary mode as Markit Manufacturing PMI well above 50 points. Business activity was getting better despite credit disbursement remained contracted. This is in line with the jump of raw materials as well as capital goods imports.
• Although from government spending perspective seemed to be quite disappointing, fiscal stimuli directed to automotive sectors (0% discount of PPnBM) was quite successful to lift up car demand along with easing LTV taken by central bank.
• However, we expct the growth story would vary across sectors. Some sectors that are highly sensitive to mobility to remain under pressure while healthcare and information sectors will likely to strengthen.
A Bumpy Road Ahead
• Recent surge of Covid-19 cases along with the widespread of Delta variant has become the major concern that could significantly derail the growth prospect of Indonesia economy.
• Government has implemented what so called PPKM Darurat & PPKM Level 4 in Java and Bali which contribute to 60% of Indonesia’s GDP.
• The impact of tighter social restriction has been seen recently. July-21 Indonesia factory activity slipped into a contraction for the first time in 9 months and the steepest pace since June-21.
• The government institutions (MoF & BI) and IMF downgraded their FY21 GDP projection.
• BI lowered FY21 GDP projection to 3.8%-4.3% (vs 4.1%-5.1% previously), meanwhile MoF slashed the forecast to 3.7%-4.5% (vs 4.5%-5.3% previously).
• We trimmed down our FY21 GDP forecast to 3.76% YoY from 4.18% YoY previously.
