Economy of Indonesia

Topics: Indonesia, Economics, 1997 Asian Financial Crisis Pages: 7 (1926 words) Published: June 5, 2013
Economy of Indonesia

Indonesia, an archipelago country comprises 13,466 islands and 33 provinces. During the 7th century, Indonesian archipelago played an important trade region, trading with China and India. Due to trade influence, the country slowly adapts foreign cultural, religious and political models from their trading partners. During early centuries, religion especially Hindu and Buddhist kingdoms was well received and developed. Indonesian has vase natural resources thus foreign powers drawn was drawn to it and naturally, with exchange of cultural Indonesia history has been influenced by their foreign trading partners. In term of religions, Christianity was brought in by their European trader and Islam was brought in by their Muslim traders. They want to take control to monopolize trade over Spice Islands and they fought ferociously. Indonesia was under the Dutch colonialism for about three and a half centuries and finally only after World War II, Indonesia achieved to be an independent country. Natural disasters, country’s corruption, separatism, and economic change, paint Indonesia's history as a time of chaotic.

In a survey studies in 2010 show that Indonesia is the world’s largest Muslim-majority nation, it is also one of the most popular country with approximately 240 million people. Indonesia is also the largest economy in South-East Asia and one of the emerging markets of the world. It has a market economy in which the government plays an important role by having own more than 150 enterprises. Prices of basic goods, example fuel, rice, and electricity are administrated by such enterprises. Foreign investments were also entering into Indonesia since the late 1980s, particularly into the rapidly developing export-oriented manufacturing sector.

In terms of economic, Indonesia suffered through difficult times in the past few decades. Rescue were needed to prevent bankruptcy a decade ago when it was badly hit by the Asian financial crisis of 1997 - 1998, leading to the fall of autocratic strongman Suharto after 32 years in power. Political instability, slow economic reform, and corruption reduce the speed of recovery. At fourth quarter 1997, rapid currency depreciation had seen public debt reach US$60 Billion, imposing severe strains on the government's budget. In 1998, real GDP contracted by 13.7%. The economy reached its low point in mid-1999 and real GDP growth for the year was 0.3%. Inflation reached 77% in 1998 but slowed to 2% in 1999. After which, Indonesia, being known for inefficiency, corruption and instability, has grown substantially over the next decade to become competitive with several of their Asian counterpart countries, and to emerge with a surprising new reputation — Economic Golden Child.

Indonesia was one of the world’s best performing economies during the 2008−2009 global financial crisis, and the only G20 economy to lower its public debt-to-GDP ratio in 2009. Growth is expected to remain strong at 6 − 6.2% in 2010−2011. However, the issue of emerging inflation pressures is already evident. Bank of Indonesia’s recent decision to raise reserve requirements is a step in the right direction. Indonesia still has somewhat higher and more volatile inflation than its trading partners and other emerging market, with include Iraq, Mongolia and Egypt.

In 2010, the gross domestic product grew 6.1% in to show that South-East Asia's biggest economy confirmed its position among the top ranks of emerging markets. The Indonesian stock market soared around 40 per cent in 2010 as well but has shed more than five per cent in early 2011 due to concerns about rising inflation, on top of persistent infrastructure bottlenecks and endemic corruption. Exports in the last quarter 2010 had increase 16.1%, showing that there is a demand of products from other countries. Investment climbed 8.7% and government spending rose 7.3%. Household consumption increased 4.4%, a key figure as about 60% of...
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