Signs of Indonesia鈥檚 economic recovery is increasingly visible according to various indicators. Vaccinations remains key to the country鈥檚 effort in bolstering the people鈥檚 economic activity.
On June 2, 2021, it was announced that Indonesia hit another record high in the IHS-Markit Purchasing Manager鈥檚 Index (PMI), which indicates a country's manufacturing industry鈥檚 level of expansion. The London-based consultancy firm gave Indonesia a score of 55.3 in its May 2021 report, an increase from its previous score of 54.6 in the previous month 鈥� beating South Korea (53.7) and even Vietnam (53.1), Japan (53) and China (52).
鈥淭he increase in Indonesia鈥檚 PMI shows that the industrial sector is rising and this increases our optimism and faith of an economic recovery in the second quarter of 2022,鈥� said Airlangga Hartarto, Coordinating Minister of Economic Affairs and Chair of the country鈥檚 COVID-19 and Economic Recovery Task Force.
Like every other country in the world, Indonesia was hit hard by the COVID-19 pandemic. Initially believed to be able to maintain a positive economic growth rate, the country鈥檚 economy contracted by 2.07% in 2020, and is officially still in a recession after a disappointing first quarter having only eased the contraction to 0.72% in 2021 according to the Indonesian Central Statistics Agency. However, like the aforementioned PMI, other indicators are making a strong argument that Indonesia may soon leave the recession behind.
As reported by the Central Bank, the country鈥檚 consumer confidence index rose for the third consecutive month to 101.5 as of April 2021, an increase from 93.4 points in the previous month, which puts it above the optimistic zone of over 100-point. Meanwhile, the banks鈥� retail sales index also improved to 6.1% as of March 2021, a significant increase from the previous month鈥檚 score of 鈥�2.7%.
This is consistent with the findings from Mandiri institute, a local think-tank, which recently announced its Mandiri Spending Index. The report states that over four-fifths of Indonesian small-and-medium-sized enterprises have started to operate under normal full hours, which has further propped up spending across all income levels. This is significant as domestic consumption makes up nearly 60% of Indonesia鈥檚 GDP.
The improving domestic condition is partially buoyed by the improving economic conditions seen elsewhere across the world, particularly in the United States and China. Indonesia鈥檚 export growth rose 6.7% year-on-year in the first quarter of 2021 from a contraction of 7.2% in the fourth quarter of 2020, owing to increased demand from the US and China.
Vaccination remains key
To date, Indonesia has administered over 28 million dosages of COVID-19 vaccines and fully vaccinated 6% of the eligible population. The country began its vaccination drive earlier in the year and was inoculating over 100,000 people per day. That effort was slowed down due to a supply delay issue stemming from the spike of COVID-19 cases in India. Indonesia has started receiving COVID-19 vaccines again however and is ramping up its effort to get its population vaccinated. Indonesia has received over 91.9 million dosages of vaccines from China-based pharmaceutical SinoVac as well as additional supplies from UK-based pharmaceutical AstraZeneca as part of Indonesia鈥檚 participation in the global vaccine alliance COVAX-GAVI.
According to data from the Indonesian COVID-19 Task Force, as of June 6, 2021, there over 1.8 million confirmed cases, 1.7 million recoveries, and 51,612 deaths from COVID-19.
The question that will continue to haunt Indonesia鈥檚 economic recovery in the short term is whether the country will be able to protect its population from COVID-19 through its ongoing vaccination drive, or experience an upward spike caused by the emerging COVID-19 variants as seen in the neighboring country within the Asia-Pacific region such as India. The answer to that question remains to be seen. Nevertheless, based on the aforementioned indicators, authorities remain optimistic that Indonesia would be able to achieve an economic growth rate of between 4.1 to 5.1% by the end of the year.