JAKARTA -- Indonesia's economy in the third quarter continued its bounce back from its COVID-induced slowdown, albeit at a slower pace than the previous quarter.
Indonesia's real gross domestic product rose 3.51% in the third quarter from a year earlier, according to data that the country's statistics agency released on Friday. This was weaker than the median forecast of 3.76% by 21 analysts polled by Reuters. The country's finance ministry had forecast year-on-year GDP growth of 4.5% for the three months ended in September.
Despite being given a leg up from a low base effect -- GDP contracted 3.49% in the same period last year -- this marked a significant slowdown from the second quarter, when GDP grew 7.07%, the strongest showing in nearly two decades.
Indonesia saw a rapid surge in COVID-19 cases in July as the delta variant swept across the country, leading the government to impose tighter social restrictions, hampering the economy.
However, since the end of July, coronavirus transmissions have rapidly declined, with daily cases now coming in well below 1,000. And with social restrictions having been eased, the country's economy should accelerate this quarter.
The government is hoping its vaccination program will add momentum to the current trend. While the country's overall vaccination rate remains low, with only 27.44% of the eligible population being fully vaccinated, according to Our World in Data, Jakarta, the nation's capital where the bulk of the economic activity takes place, has a significantly higher vaccination rate. Over 75% of its population has been vaccinated.
The finance ministry is expecting annual GDP growth of 4% this year, while Bank Indonesia, the country's central bank, said after its October meeting that it was expecting 3.5% to 4.3% growth.
A spot of worry for Indonesia is the winding down of monetary policy accommodation in the U.S. The U.S. Federal Reserve on Wednesday said it will begin tapering the pace of its asset purchases later this month. Fresh in Indonesian memories is the "taper tantrum" of 2013, which led to a wider emerging-market sell-off.
"The balance of macro factors still points to a less severe shock compared to past Fed tightening cycles," economists at Bank Central Asia said in a recent report, "but 2022 could prove to be more challenging than 2021, especially if domestic inflation begins to flare up."