JAKARTA -- Indonesia's economy grew for the first time in five quarters in the April-June period, recording its strongest expansion in at least a decade.
Indonesia's real gross domestic product rose 7.07% in the second quarter from a year earlier, data from the country's statistics agency showed Thursday, faster than the median forecast of 6.57% of 22 analysts polled by Reuters. The expansion was given a leg up from a low base effect, with GDP having contracted 5.3% in the same period last year.
But growth appears set to slow again in coming quarters. Tighter social restrictions introduced in early July to curb the spread of the delta coronavirus variant are set to weigh heavily on Southeast Asia's biggest economy,
Indonesia enjoyed a rare COVID-19 lull during the three months from April, with daily new cases averaging around 5,000 until early June. But delta has now taken a grip, pushing the country's total COVID death toll past 100,000.
Bank Indonesia, the country's central bank, lowered its 2021 growth forecast to 3.5%-4.3% from the previous 4.1%-5.1% in its July monetary policy meeting. In its meeting in December, the central bank was forecasting 4.8% to 5.8% GDP growth for this year. Meanwhile the finance ministry projection for GDP growth this year is 3.7%-4.5%.
The government is hoping its vaccination program will help the economic recovery, but progress remains slow. Despite efforts to expedite the program, only 7.8% of the population eligible for vaccination has been fully vaccinated, according to Our World in Data. The country has decided to administer third shots to medical workers, and with talk of booster shots potentially being needed for the general population, herd immunity may be some time away.
Finance minister Sri Mulyani Indrawati said Wednesday that the country's health budget could balloon to 300 trillion rupiah ($20.9 billion) this year, some 39.5% higher than what is currently allocated.
"Despite the recent easing of COVID cases, still a relatively high number of deaths and faster increases in cases outside the islands of Java and Bali may slow economic reopening," said Aldian Taloputra, senior Indonesia economist at Standard Chartered Bank. "We estimate that each one-month period of mobility restrictions reduces GDP growth by around 0.5ppt."