| Date - Field | Indonesia - Economy - overview |
2012 January
Economy - overview | Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment by both local and foreign investors is also supporting solid growth. Although the economy slowed to 4.5% growth in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate. During the recession, Indonesia outperformed most of its regional neighbors. The government made economic advances under the first administration of President YUDHOYONO, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship, leading two of the three leading credit agencies to upgrade credit ratings for Indonesia's sovereign debt to one notch below investment grade. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. YUDHOYONO and his vice president, respected economist BOEDIONO, have maintained broad continuity of economic policy, although the economic reform agenda has been slowed during the first year of their term by corruption scandals and the departure of an internationally respected finance minister. In late 2010, increasing inflation, driven by higher and volatile food prices, posed an increasing challenge to economic policymakers and threatened to push millions of the near-poor below the poverty line. The government in 2011 faces the ongoing challenge of improving Indonesia's infrastructure to remove impediments to growth, while addressing climate change concerns, particularly with regard to conserving Indonesia's forests and peatlands, the focus of a potentially trailblazing $1 billion REDD+ pilot project. |
2011 January
Economy - overview | Indonesia, a vast polyglot nation, has weathered the global financial crisis relatively smoothly because of its heavy reliance on domestic consumption as the driver of economic growth. Although the economy slowed significantly in 2009 from the 6%-plus growth rate recorded in 2007 and 2008, by 2010 growth returned to a 6% rate. During the recession, Indonesia outperformed its regional neighbors and joined China and India as the only G20 members posting growth. The government made economic advances under the first administration of President YUDHOYONO, introducing significant reforms in the financial sector, including tax and customs reforms, the use of Treasury bills, and capital market development and supervision. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. YUDHOYONO's reelection, with respected economist BOEDIONO as his vice president, suggests broad continuity of economic policy, although the start of their term has been marred by corruption scandals and the departure of an internationally respected finance minister. The government in 2010 faces the ongoing challenge of improving Indonesia's insufficient infrastructure to remove impediments to economic growth, while addressing climate change mitigation and adaptation needs, particularly with regard to conserving Indonesia's forests and peatlands, the focus of a potentially trailblazing $1 billion REDD+ pilot project. |
2010 January
Economy - overview | Indonesia, a vast polyglot nation, has made significant economic advances under the administration of President YUDHOYONO but faces challenges stemming from the global financial crisis and world economic downturn. Indonesia's debt-to-GDP ratio in recent years has declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. The government has introduced significant reforms in the financial sector, including in the areas of tax and customs, the use of Treasury bills, and capital market supervision. Indonesia's investment law, passed in March 2007, seeks to address some of the concerns of foreign and domestic investors. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. The non-bank financial sector, including pension funds and insurance, remains weak. Despite efforts to broaden and deepen capital markets, they remain underdeveloped. Economic difficulties in early 2008 centered on high global food and oil prices and their impact on Indonesia's poor and on the budget. The onset of the global financial crisis dampened inflationary pressures, but increased risk aversion for emerging market assets resulted in large losses in the stock market, significant depreciation of the rupiah, and a difficult environment for bond issuance. As global demand has slowed and prices for Indonesia's commodity exports have fallen, Indonesia faces the prospect of growth significantly below the 6-plus percent recorded in 2007 and 2008. |
2009 January
Economy - overview | Indonesia, a vast polyglot nation, has made significant economic advances under the administration of President YUDHOYONO, but faces challenges stemming from the global financial crisis and world economic downturn. Indonesia's debt-to-GDP ratio in recent years has been declined steadily because of increasingly robust GDP growth and sound fiscal stewardship. The government has introduced significant reforms in the financial sector including tax and customs reforms, the use of Treasury bills, and improved capital market supervision. Indonesia's new investment law, passed in March 2007, seeks to address some of the concerns of foreign and domestic investors. Indonesia still struggles with poverty and unemployment, inadequate infrastructure, corruption, a complex regulatory environment, and unequal resource distribution among regions. The non-bank financial sector, including pension funds and insurance, remains weak, and despite efforts to broaden and deepen capital markets, they remain underdeveloped. Economic difficulties in early 2008 centered on high global food and oil prices and their impact on Indonesia's poor and on the budget. The onset of the global financial crisis relieved inflation but also brought a host of new problems: a rout in the stock market, a difficult environment for bond issuance, lower prices for Indonesia's commodities exports, and prospects for lower growth overall. |
2008 January
Economy - overview | Indonesia, a vast polyglot nation, struggles with persistent poverty and unemployment, inadequate infrastructure, pervasive corruption, a fragile banking sector, a poor investment climate, and unequal resource distribution among regions. Declining oil production and lack of new exploration investment turned Indonesia into a net oil importer in 2004. The cost of subsidizing domestic fuel strained the budget in 2005, ultimately prompting the government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes dampened growth through mid-2006, while large increases in rice prices pushed millions more people under the national poverty line. The economy accelerated throughout 2007, but keys to sustained future growth remain internal reform and building up the confidence of international and domestic investors. The high global price of oil in 2007 increased the cost of domesic fuel and electricity subsidies, which consume a significant share of government spending. Significant progress has been made in rebuilding Aceh after the devastating December 2004 tsunami, and the province now shows more economic activity than before the disaster. Unfortunately, Indonesia suffered new disasters in 2006 and early 2007 including: a major earthquake near Yogyakarta, an industrial accident in Sidoarjo, East Java that created a "mud volcano," a tsunami in South Java, and major flooding in Jakarta, all of which caused additional damages in the billions of dollars. Donors are assisting Indonesia with its disaster mitigation and early warning efforts. |
2007 January
Economy - overview | Indonesia, a vast polyglot nation, has struggled to overcome the Asian financial crisis, and still grapples with high poverty and unemployment, inadequate infrastructure, endemic corruption, a fragile banking sector, a poor investment climate, and unequal resource distribution among regions. The country continues the slow work of rebuilding from the devastating December 2004 tsunami and from an earthquake in central Java in May 2006 that caused over $3 billion in damage and losses. Declining oil production and lack of new exploration investment turned Indonesia into a net oil importer in 2004. The cost of subsidizing domestic fuel placed increasing strain on the budget in 2005, and combined with indecisive monetary policy, contributed to a run on the currency in August, prompting the government to enact a 126% average fuel price hike in October. The resulting inflation and interest rate hikes dampened growth through mid-2006, while large increases in rice prices pushed millions more people under the national poverty line. Economic reformers introduced three policy packages in 2006 to improve the investment climate, infrastructure, and the financial sector, but translating them into reality has not been easy. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. |
2006 January
Economy - overview | Indonesia, a vast polyglot nation, has restored financial stability and pursued sober fiscal policies since the Asian financial crisis, but many economic development problems remain, including high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and unequal resource distribution among regions. Indonesia became a net oil importer in 2004 due to declining production and lack of new exploration investment. As a result, Jakarta is not reaping the benefits of high world oil prices, and the cost of subsidizing domestic fuel prices has placed an increasing strain on the budget. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. In late December 2004, a major tsunami took over 237,000 lives in Indonesia and caused massive destruction of property. |
2005 January
Economy - overview | Indonesia, a vast polyglot nation, has restored financial stability and pursued sober fiscal policies since the Asian financial crisis, but many economic development problems remain, including high unemployment, a fragile banking sector, endemic corruption, inadequate infrastructure, a poor investment climate, and unequal resource distribution among regions. Indonesia became a net oil importer in 2004 due to declining production and lack of new exploration investment. As a result, Jakarta is not reaping the benefits of high world oil prices, and the cost of subsidizing domestic fuel prices has placed an increasing strain on the budget. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. In late December 2004, a major tsunami took over 237,000 lives in Indonesia and caused massive destruction of property. |
2004 January
Economy - overview | Indonesia, a vast polyglot nation, faces economic development problems stemming from recent acts of terrorism, unequal resource distribution among regions, endemic corruption, the lack of reliable legal recourse in contract disputes, weaknesses in the banking system, and a generally poor climate for foreign investment. Indonesia withdrew from its IMF program at the end of 2003, but issued a "White Paper" that commits the government to maintaining fundamentally sound macroeconomic policies previously established under IMF guidelines. Investors, however, continued to face a host of on-the-ground microeconomic problems and an inadequate judicial system. Keys to future growth remain internal reform, building up the confidence of international and domestic investors, and strong global economic growth. |
2003 January
Economy - overview | Indonesia, a vast polyglot nation, faces severe economic development problems stemming from secessionist movements and the low level of security in the regions; the lack of reliable legal recourse in contract disputes; corruption; weaknesses in the banking system; and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. In November 2001, Indonesia agreed with the IMF on a series of economic reforms in 2002, thus enabling further IMF disbursements. Negotiations with the IMF and bilateral donors continued in 2002. Keys to future growth remain internal reform, the build-up of the confidence of international donors and investors, and a strong comeback in the global economy. |
2002 January
Economy - overview | Indonesia, a vast polyglot nation, faces severe economic development problems, stemming from secessionist movements and the low level of security in the regions, the lack of reliable legal recourse in contract disputes, corruption, weaknesses in the banking system, and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. In November 2001, Indonesia agreed with the IMF on a series of economic reforms in 2002, thus enabling further IMF disbursements. Keys to future growth remain internal reform, the build-up of the confidence of international donors and investors, and a strong comeback in the global economy. |
2001 January
Economy - overview | Indonesia, a vast polyglot nation, faces severe economic problems, stemming from secessionist movements and the low level of security in the regions, the lack of reliable legal recourse in contract disputes, corruption, weaknesses in the banking system, and strained relations with the IMF. Investor confidence will remain low and few new jobs will be created under these circumstances. Growth of 4.8% in 2000 is not sustainable, being attributable to favorable short-term factors, including high world oil prices, a surge in nonoil exports, and increased domestic demand for consumer durables. |
2000 January
Economy - overview | The Indonesian economy stabilized in 1999, following the sharp contraction and high inflation of 1998. By following tight monetary policy, the government reduced inflation from over 70% in 1998 to 2% in 1999. Although interest rates spiked as high as 70% in response to the monetary contraction, they fell rapidly to the 10% to 15% range. The economy stopped its free-fall as GDP showed some growth in the second half of 1999, although GDP for the year as a whole showed no growth. The government managed to recapitalize a handful of private banks and has begun recapitalizing the state-owned banking sector. New lending, however, remains almost unavailable as banks continue to be wary of issuing new debt in an environment where little progress has been made in restructuring the huge burden of outstanding debts. IMF payments were suspended late in 1999 as the result of evidence that a private bank had illegally funneled payments it received from the government to one of the political parties. The government has forecast growth of 3.8% for FY00/01. The spread of sectarian violence and continuing dissatisfaction with the pace of bank and debt restructuring will make it difficult for Indonesia to attract the private investment necessary to achieve this goal. |
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This page was last updated on 6 February, 2012 |
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