Indonesian Growth Dynamics

Abstract

This paper provides an analytical narrative of Indonesian economic growth over the past two decades. Particular attention is paid to the key economic crisis events of 1997–1998 and 2008–2009, and how and why Indonesia's response to them was completely different. We emphasize and illustrate how the years 1997–1998 were a watershed in the country's economic history and political economy. We underline the country's generally good economic performance, especially the rapid recovery over the past decade, while also highlighting the fact that its economic growth has never quite matched that of the very high-growth East Asian economies. The final section analyzes some key policy challenges, including embedding reforms in a highly fluid political environment, macroeconomic management, and “connectivity” and regional (subnational) development.

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