MACROECONOMIC ANALYSIS SERIES: Indonesia Economic Outlook Q1 2022

Anticipating the Unexpected:
Economic Recovery in the Turbulence Period

The domestic spread of Delta variant has dragged down the promising upward trend of economic growth from 7.07% (y.o.y) in Q2 2021 to only 3.51% (y.o.y) in Q3 2021 as consumption declined and business activity in various sectors that relies on physical activity was halted. The implementation of PPKM to limit the transmission of Covid-19 hit severely the transportation & storage and accomodation & FnB sectors. Aside from agriculture, Indonesian main economic sectors, such as manufacturing, wholesale & retail trade, and construction, also experienced slower growth in Q3 2021. The second wave has also slammed brakes on all expenditure components of GDP, particularly the household consumption as the biggest contributor of GDP, which was only grew by 1.03% (y.o.y) in Q3 2021, down from 5.93% (y.o.y) in previous quarter. Amidst the ongoing crisis, credit performance has shown a favourable outlook for overall 2021 as it has gradually increased along with the improved business and consumers sentiment as economic recovery intensifies compared to its ruinous trend during 2020. However, the inflation rate throughout 2021 remains below BI�s target range. The low inflation in 2021 was influenced by domestic demand that was not yet fully recovered.

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