Our forecast suggests that we will continue to witness negative growth in the third quarter and will slightly stay below a neutral zone in the fourth quarter.
Jakarta (ANTARA) - Finance Minister Sri Mulyani Indrawati has forecast Indonesia's economic growth to contract in the third quarter of this year and to stay slightly below a neutral zone in the fourth quarter.

"Our forecast suggests that we will continue to witness negative growth in the third quarter and will slightly stay below a neutral zone in the fourth quarter," the minister noted during a working meeting with the House of Representatives’ (DPR’s) Commission XI here on Wednesday.

The economy will potentially contract in the third quarter owing to the still fragile ongoing economic recovery, she remarked.

Public activities began to increase in May and June, and consumption is expected to recover in stages, the minister noted.

"The indicators of our consumption showed signs of improvement in May and June after it came under heavy pressure," she stated.

However, the Expectations Index from June to July remained flat and that the momentum of initial economic recovery must be kept in check, she remarked.

"Admittedly, there was a more convincing reverse in May, but the momentum must not be taken for granted," she stated.

The government has set the target of economic growth for 2020 at minus 1.1-0.2 percent, she remarked.

The minister expounded that the economic growth assumption of 0.2 percent is based on the third- and fourth-quarter growth that might recover and compensate for the third-quarter contraction.

The government has revised down the economic growth forecast for 2020 to minus 1.1-0.2 percent, from minus 0.4-2.3 percent earlier.

“We arrived at the last forecast after observing the realization in the second quarter and in July. We forecast growth in 2020 to stay within the range of minus 1.1 percent to 0.2 percent,” the minister stated at a press conference on the bill on the 2021 state budget and financial notes here recently.

The downward revision of the 2020 economic growth was based on the second-quarter growth that contracted up to 5.32 percent year-on-year (yoy), she expounded.

"This translates to the fact that it rather moves in the negative direction or comes close to zero since we see the pressure in the second quarter is very deep," she stated.

The deeper contraction in the second quarter sent a signal to the government to exercise caution in handling the impact of the COVID-19 pandemic, and it will be managed properly in the third and fourth quarters, she remarked.
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