Indonesia finmin says second quarter GDP may shrink by as much as 5.1%

JAKARTA (Reuters) - Indonesia’s gross domestic product may have shrunk by as much as 5.1% on-year in April-June because of the fallout from the coronavirus pandemic, but will likely expand in subsequent quarters, its finance minister said on Thursday.

Sri Mulyani Indrawati said the government kept its baseline forecast for a 3.8% annual contraction in second quarter GDP, but was using a range of -3.5% to -5.1% in its prediction.

Southeast Asia’s largest economy is expected to see the economy rebounding in the second half of 2020, with social restrictions eased, Indrawati told parliament’s budgetary committee, giving a range of 0.3% to 2.2% for second-half yearly growth rate.

The government spent 1,068.9 trillion rupiah ($74.62 billion) in the first half of 2020, or 39% of this year’s budget, but spending was expected to accelerate, Indrawati said.

Bank Indonesia Governor Perry Warjiyo told the same hearing that he and Indrawati had agreed to focus their policies on reviving economic activity in the short term.

“We have agreed, madam minister (of finance) will focus on absorbing the state budget while we focus on providing monetary stimulus,” he said.

The governor also reiterated that Bank Indonesia still has room for further rate cuts after three reductions so far this year.

Reporting by Gayatri Suroyo and Maikel Jefriando; Editing by Clarence Fernandez