TEMPO.CO, Jakarta - The Statistics Indonesia (BPS) recorded the state's economic growth experienced a contraction of 3.49 percent (year-on-year/yoy) in the third quarter of 2020. The figure slightly improved or rebound from the second quarter of minus 5.32 percent.

“This result is worse than market consensus, worse than the government expectations,” said a private lender CIMB Niaga Chief Economist, Adrian Panggabean, in an official statement in Jakarta, Thursday, November 5, 2020.

At the end of September 2020, Finance Minister Sri Mulyani Indrawati predicted that the country’s economy in the third quarter of 2020 would grow minus 1 to minus 2.9 percent. Yet, Adrian stated that the growth realization was close to the CIMB Niaga estimation of minus 3.3 percent.

Sri Mulyani at that time also said that the economic recovery in the Q3 would be driven by government spending. In response to the statement, Adrian argued that government spending could not boost every recovery effort.

Adrian opined that only government spending in the form of social assistance was the most helpful for economic growth. However, the budget realization for the National Economic Recovery (PEN) of more than Rp695 trillion was still very low, he added.

Adrian suspected that this was caused by the spending structure in the State Budget or APBN that had not been optimized. As a result, the multiplier effect for the fiscal side was not significant and led to a growth contraction of 3.49 percent.

Read: Indonesia in Recession; Bali, Nusa Tenggara Economies Hit the Hardest

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