JAKARTA • Indonesia's economy grew at its weakest pace since 2001 in the first quarter, as the coronavirus pandemic halted business activity in South-east Asia's largest economy and fuelled expectations of a looming recession.

The coronavirus crisis has hit consumption - the main driver of the economy - investment and vital commodity exports, although Indonesia's growth pace was still higher than those of some countries in the region.

Gross domestic product (GDP) in January-March expanded a slower-than-expected 2.97 per cent from a year earlier, the weakest pace since the first quarter of 2001, statistics bureau data showed yesterday, and down from the previous quarter's 4.97 per cent.

A Reuters poll had a median forecast of 4.04 per cent, but some analysts had expected far weaker growth.

Indonesia's main stock index pared gains to end 0.5 per cent higher, after rising as much as 1.4 per cent earlier. The rupiah appreciated slightly to 15,030 per dollar.

The economy held up relatively better in the first quarter because Indonesia locked down parts of the country later, said Capital Economic senior Asia economist Gareth Leather, who sees a sharp contraction in the second quarter.

"The lockdown will need to remain in place for a while longer yet. Failure to contain the virus would have significant implications for the economic outlook," he said.

The world's fourth-most populous country first detected coronavirus cases in early March and began closing schools and offices later in the month to contain its rapid spread.

It has reported more than 12,000 infections and 872 deaths, though the authorities hope Indonesians would be able to resume normal activities by July.

Bank of America economist Mohamed Faiz Nagutha said Indonesia may enter its first technical recession since the Asian financial crisis by the second quarter.

He said first-quarter data would likely show a contraction when seasonally adjusted, and forecast a near minus 5 per cent quarter-on-quarter plunge in April-June.

Bank Permata economist Josua Pardede sees a recession by the third quarter if Indonesia extends its partial lockdowns and the government's stimulus does not work quickly enough.

Finance Minister Sri Mulyani Indrawati has flagged a risk of recession and a full-year GDP contraction of 0.4 per cent, but said the authorities were working to prevent this.

Economists say the data signals a need to cut interest rates further.

Standard Chartered and Jakarta-based Bank Danamon predict cuts of 50 basis points in total for the rest of the year.

Bank Indonesia has lowered rates six times since last year and pumped money into the financial system, while the government has expanded its fiscal deficit to the biggest in more than a decade to fund spending on healthcare, welfare and stimulus.

In January-March, household consumption, which accounts for over half of GDP, registered growth of just 2.84 per cent, compared with around 5 per cent in recent quarters.

Investment and exports also weakened, growing 1.7 per cent and 0.24 per cent, respectively.

REUTERS