The Indonesian economy shrank in the second quarter — the first downturn in 20 years — following restrictions on business activity and resulting job losses due to the coronavirus pandemic.

Indonesia's real GDP contracted at an annual rate of 5.32% in the second quarter following growth of 2.97% in the previous quarter, according to Statistics Indonesia.

Data from the Organization for Economic Cooperation and Development showed that the second-quarter contraction was the first economic slump since the first quarter of 1999 in the aftermath of the Asian Financial Crisis, the Nikkei Asian Review reported.

Economic activity slowed down in the second quarter as the government imposed social restrictions, prompting businesses to pause or completely cease operations while consumer activity also weakened.

The economy has shed about 3.7 million jobs in 2020 and that number is projected to rise to 10 million by year-end, The Jakarta Post reported, citing data from the National Development Planning Agency.

Consumer spending declined 5.51% in the second quarter while investment dropped 8.61%. Exports and imports plunged 11.66% and 16.96%, respectively, while government spending contracted 6.9%.

The government expects real GDP to expand 1% at best in the full year and shrink 0.4% under the worst-case scenario, according to The Jakarta Post.

Indonesia faces a slow recovery path with real GDP returning to positive territory only in 2021, according to Sung Eun Jung, economist at Oxford Economics. "Looking ahead, we remain cautious on the likely pace of recovery in [the second half], with GDP growth contracting 2.7% in 2020 as a whole," she said.