Sectoral Evidence on Indonesian Economic Performance after the Pandemic

Author Name Willem THORBECKE (Senior Fellow, RIETI)
Creation Date/NO. October 2023 23-E-071
Research Project Economic Shocks, the Japanese and World Economies, and Possible Policy Responses
Download / Links


The Indonesian economy has a long history of steady growth punctuated by times of turmoil and crisis. Recently Indonesia has faced the COVID-19 pandemic, inflation, contractionary U.S. monetary policy, and fluctuating commodity prices. To examine how the economy is faring since the pandemic began, this paper compares sectoral stock returns since COVID-19 hit the Indonesian economy with forecasted returns based on macroeconomic variables. The results indicate that coal, iron and steel, healthcare, and pharmaceuticals are outperforming more than three years after the coronavirus crisis began. Tobacco, industrials, and sectors related to construction are underperforming. The regression evidence also indicates that Indonesian sectors are primarily exposed to the Indonesian stock market. Coal, iron and steel and natural resources stocks are less exposed to the Indonesian stock market and more exposed to the world stock market. Almost no sectors exhibit exposure to contractionary U.S. monetary policy. The importance of the Indonesian stock market in explaining stock returns reflects the fact that the Indonesian economy is largely driven by domestic demand. To increase its resilience, Indonesia should also nurture labor-intensive exports.

Published: Thorbecke, Willem, 2024. "Sectoral evidence on Indonesian economic performance after the pandemic," Asia and the Global Economy, Volume 3, Issue 2 (2023), 100069.