JAKARTA -- Indonesia fell into recession for the first time in two decades, as the coronavirus pandemic took its toll on Southeast Asia's largest economy.
The country's real gross domestic product plunged 3.49% in the three months ended September from a year earlier, according to data released on Thursday. The slowdown follows a 5.32% contraction in the previous quarter, plunging the archipelago into a recession -- defined as two consecutive quarters of negative growth.
This is the first time Indonesia's economy has experienced consecutive contractions since the Asian financial crisis in the late 1990s. The country then recorded five consecutive quarters of negative GDP growth from the first quarter of 1998 through the first quarter of 1999, according to data from the Organization for Economic Cooperation and Development.
The decline was steeper than the 3% contraction forecast in a Reuters poll of 23 economists. President Joko Widodo had said earlier in the week that he expected third-quarter GDP to contract more than 3%.
Household consumption, which makes up over half of Indonesia's GDP, shrunk 4.04% year-on-year, after a steeper 5.52% fall in the previous quarter. On a quarterly basis, Indonesia's GDP grew 5.05% in the July-September period, recovering from a 4.19% contraction.
Economists had initially forecast a stronger recovery in the three months ended September, but were forced to downgrade estimates after the country tightened restrictions as COVID-19 cases rose.
Speaking at a news conference on Thursday, Finance Minister Sri Mulyani Indrawati said the data shows "the worst is over" for Indonesia's economy. "We have already passed the worst impact of COVID-19 that occurred in Q2 and now we are in the recovery stage," she said.
Indonesia has the biggest COVID-19 outbreak in Southeast Asia. As of Wednesday, it had reported 421,731 cases and 14,259 deaths. Jakarta accounts for a quarter of the infections.
"The problem is that Indonesia has yet to effectively contain COVID-19 domestically," said Joseph Incalcaterra, chief economist of ASEAN at HSBC.
"There is a risk that Indonesia's recovery is further curtailed due to uncertainty surrounding the spread of COVID-19 and the fact that a vaccine does not appear imminent. The continuing spread of COVID-19... will hinder a more robust recovery in private consumption and fixed investment going into next year."
The country has also been rocked by protests on the controversial omnibus law, which the president signed into force on Monday. The law seeks to reduce red tape to increase investment. Widodo sees the law as crucial to reigniting economic growth and jobs.
However, labor unions, students and Islamic organizations have raised concerns about the law, which they say damages workers' rights -- an issue given added urgency by the millions of jobless due to the pandemic.
The country's statistics agency said on Thursday that as of August, more than 2 million people have lost their jobs because of COVID-19.
Bank Indonesia, the country's central bank, said last week that further interest rate cuts remain an option. The bank has cut its benchmark rate by 100 basis points this year, but stood pat in each of its last four monetary policy meetings.