If a country experiences a recession, this is a terrible impact

Jakarta, CNBC Indonesia – The past week, milling about the word ‘Recession’. This was triggered by a neighboring country which is only a few kilometers away from Indonesia experiencing a recession.

Indeed, since the corona virus has invaded the world, the word recession is often referred to, and has alarmed everyone. Recession itself is a significant decline in economic activity and lasts for at least two consecutive quarters.

A country is said to have experienced a recession if its gross domestic product (GDP) has contracted or decreased in 2 consecutive quarters on an annual or year-on-year basis (YoY). Meanwhile, if GDP minus 2 consecutive quarters quarterly or quarter-on-quarter (QoQ) is called a technical recession.

Launching The Balance, there are 5 economic indicators that are used as a reference for a country experiencing a recession, namely real GDP, income, unemployment rate, manufacturing, and retail sales.
Recessions are actually common and often occur in an economic cycle, but the impact given when a recession occurs is quite bad.

Countries like the United States (US) alone have experienced dozens of recessions. Launch Investopedia, the US (the country with the largest economic value on earth) has experienced 33 recessions since 1854. Meanwhile, when viewed since 1980, Uncle Sam’s country experienced 4 times recesses, including those that occurred during the 2008 global financial crisis.

How about Indonesia?

The last time the beloved country had experienced a recession in 1998, even very deep, and there is a risk of happening again this year. The reason is, of course the corona virus pandemic (Covid-19) which has slowed the economy even stopped.

Not only the recession, even at that time Indonesia was said to experience depression due to minus GDP in 5 consecutive quarters. During 1998, Indonesia’s GDP experienced a contraction of 13.02%.

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While this year, Indonesia is at risk of experiencing a recession, but it is likely not to be as horror as 1998. The International Monetary Fund (International Monetary Fund / IMF) in its latest release entitled A Crisis Like No Other, An Uncertain Recovery predicts Indonesia’s GDP will be minus 0, 3% this year.

In the first quarter of 2020, Indonesia’s economy only grew 2.97% YoY, down considerably from the fourth quarter of 2019 of 4.97%. In this quarter, the economy is at risk of becoming increasingly difficult, because of this, the adoption of the Large-Scale Social Restrictions (PSBB) policy, which came into effect in several regions. While in the first quarter, the PSBB policy was not implemented.
As a result, the economic wheel in the second quarter experienced a significant slowdown, so that economic growth is threatened to decline.

Data on unemployment, manufacturing activity and retail sales in Indonesia have sent a signal of potential recession.
The Covid-19 pandemic made Employment Termination everywhere. As of May 12, the total number of workers laid off and laid off was 1,727,913.

Indonesia’s manufacturing sector has also fallen sharply, although it improved slightly in May. On Tuesday (2/6/2020), IHS Markit reported that Indonesia’s manufacturing Purchasing Managers’ Index (PMI) for May was 28.6. Up compared to April which amounted to 27.5.

PMI uses the number 50 as the threshold, under 50 means expansion while above 50 means expansion.

The Indonesian PMI in April was the lowest recorded since April 2011.

Meanwhile, retail or retail sales are also sounding down. In the latest release of the Bank Indonesia Retail Sales Survey (SPE), retail sales in April 2020 were recorded at minus 16.9% YoY. This is the deepest contraction since December 2008.

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Almost all retail sales posts contracted. The most posts in the contraction were fuel sales of -39% YoY, cultural and recreational goods by -48.5% YoY and other items such as clothing by -68.5% YoY.

Understandably, when PSBB is applied the community is asked to remain at home, so that consumption also decreases dramatically.



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