The latest virus resurgence in Indonesia will hurt Q3 growth and delay the economic recovery. The risks to ANZ Bank’s below-consensus 4% growth forecast for 2021 have become further skewed to the downside.
Vaccination pace not fast enough
“We are sticking with our 2021 growth forecast of 4% for now, which is below the Bloomberg consensus of 4.5% and BI’sforecast of 4.1-5.1%, and at the lower end of the government’s newly revised projection of 3.7-4.5% (4.1-5.1%previously). Our projection implies growth of 5% YoY in H2, and is predicated on the economy picking up in the latter half of Q3.”
“We estimate Q2 growth at 7% YoY, given that Indonesia’s economy had shown signs of improvement for most of the quarter, as well as the low base effects in play. However, the risks to our below-consensus growth forecast have become skewed to the downside.”
“The experience of other economies in the region suggest restrictions are likely to be extended, which would in turn further delay the recovery. To compound matters, the scope for significant policy support has narrowed.”
“Vaccinations will be key to the economic recovery, but vaccine delays and efficacy are watch points. Notably, Indonesia’s orders from AstraZeneca andNovavax are reportedly facing delays. There are also concerns if the existing vaccines can provide sufficient protection against the newer virus strains.”
