Indonesia Central Bank Warns of U-shaped Economic Recovery from Pandemic
JAKARTA (Reuters) - Indonesia's central bank expects Southeast Asia's biggest economy to see a U-shaped recovery from the impact of the pandemic, a senior official said on Monday, with a continuing rise in coronavirus cases set to impede a sharper rebound.
Destry Damayanti, Bank Indonesia's (BI) senior deputy governor, told an online seminar the world's fourth most populous country had not yet seen a peak of infections, underpinning BI's expectations of a slower-than-expected recovery.
Indonesia overtook China on Saturday as the country with the most confirmed infections in East Asia. On Sunday, authorities also reported the highest daily increase in COVID-19 deaths with total cases at 86,521 and 4,143 fatalities.
BI at the beginning of the pandemic had predicted a V-shaped recovery, though it had since trimmed its gross domestic product outlook several times.
"With the development in cases continuing to rise, this makes it unlikely that there will be 100% relaxation (of coronavirus-related restrictions)," she said. "It will be gradual and this means the economy cannot recover quickly."
BI officials last week said economic activity was the weakest in April and May, with the sharpest GDP contraction expected in the second quarter.
Damayanti, who holds the second-highest position at the central bank, said BI's prediction was for a second-quarter contraction of 4% to 4.8%, roughly in line with the government's prediction for a 4.3% contraction.
"If we choose to be defensive, with lockdowns or large-scale curbs, the economy may worsen," she said, describing Indonesia's current situation as "survival mode".
Meanwhile, fears of a prolonged global downturn has put pressure on emerging market assets, including the rupiah <IDR=>, as some investors returned to safe-haven assets, she said. The rupiah fell 0.9% on Monday to 14,745 a dollar at 0443 GMT.
BI was committed to help shore up the economy via bond-buying operations and rate cuts, Damayanti said, while pledging to be prudent in assessing the impact of such measures on inflation and the rupiah.
President Joko Widodo earlier this month said Indonesia's coronavirus outbreak was now expected to peak in August or September.