JAKARTA -- Indonesia's economic growth slowed more than expected in the first quarter of 2020 as the impact of the coronavirus had a devastating effect on the archipelago.
Officials are expecting a further deceleration as the number of patients continues to rise.
The country's real gross domestic product rose 2.97% in the three months ended in March from the same period last year. That was down from growth of 4.97% in the final quarter of 2019, according to data published by Badan Pusat Statistik, Indonesia's statistics agency, on Tuesday.
It was also significantly lower than the 4.04% growth that a Reuters poll had forecast and the weakest reading since the first quarter of 2001, according to the statistics bureau.
Southeast Asia's largest economy did not have a single case of COVID-19 until the start of March, and social-distancing measures in its capital, Jakarta, were not introduced until mid-March. However, a month of being affected by the virus, as well as a global economic slowdown, was enough to significantly decelerate the country's growth in the first quarter.
Growth in household consumption, which makes up over half of Indonesia's GDP, dropped to 2.84% from 5.02% in the fourth quarter of 2019.
While accounting for less than 10% of GDP, the tourism sector has been hit particularly hard. Separate data released on Monday showed foreign tourist arrivals plunged 64% year-on-year in March.
"GDP growth in Indonesia held up better than elsewhere [in the world] in the first quarter... but we doubt this resilience will last," Gareth Leather, senior Asia economist at Capital Economics, said.
"Indonesia was later than other countries to lock down its economy, meaning more of the hit will have fallen in the second quarter," he said. "We expect a large contraction in the second quarter."
With the number of cases continuing to climb -- it had 11,587 confirmed cases and 864 deaths as of Monday -- and social-distancing measures in the capital already extended to late-May, officials are bracing for a much more severe economic downturn in the coming months.
The finance ministry expects GDP this year to grow by a meager 2.3%, down from 5.02% last year.
The government has already put in place measures to mitigate the economic impact of the virus outbreak, including relaxing its legal fiscal deficit cap, and putting together a stimulus package worth 405 trillion rupiah ($26.8 billion), equivalent to 2.5% of GDP.
The central bank has also already cut interest rates twice this year by a combined 50 basis points, and purchased government debt in the primary market, effectively printing money.
But Leather said there is "limited room" for policy easing. The raising of the fiscal deficit limit to 5% of GDP from 3% is "still much lower" than other countries in the region, while the need to keep the Indonesian rupiah stable "also limits the room for the central bank to lower interest rates," he said.
Meanwhile, the Indonesian Chamber of Commerce chairperson, Rosan Perkasa Roeslani, has said the current 405 trillion rupiah stimulus package is "far from ideal" and the government needs to increase it significantly, to around 1.6 quadrillion rupiah.
The existing policy measures have put credit agencies on alert, with S&P Global ratings revising Indonesia's long-term ratings to "BBB-negative" from "BBB-stable."
"The Indonesian government's bold fiscal measures will help to stabilize the economy and support a more robust public health response, but will also add to the public debt stock," it said in April when it made the decision.
"Indonesia's external debt position has weakened following a material depreciation of the rupiah, and external risks are likely to remain elevated for the next one to two years," it said.