The Indonesian Economy

Economically, 1987 has been another very difficult year for Indonesia. Although world oil prices recovered somewhat from their July 1986 low point, rising debt service largely offset the benefit to the balance of payments, and the uncertain world economic out look held little promise of an easier external environment. Under the impact of the dramatic decline in export earnings and government revenue from oil, and of the austerity measures the government has taken to cope with it, the economy remained depressed, with only patchy signs of recovery. Economic growth was estimated at around 3 per cent in 1986 and may have been a little higher in 1987, but it is less than half the high rates of the 1970s and quite inadequate to ensure employment opportunities for a work-force growing at over 2 per cent a year. There was some evidence that the sharp devaluation of the rupiah of September 1986 had given a much-needed fillip to non-oil exports, especially of manufactures, but it also left a legacy of impaired business confidence. Drastic government intervention was needed to stop capital flight abroad which had accelerated through the first half of 1987. Preoccupation with these macro-economic difficulties partly accounts for a slowing down in the programme of micro-economic reforms which had recorded several major achievements in 1986. The expectation of major changes in the key economic Cabinet posts after the March 1988 presidential elections may have been another reason. This also gives grounds for hope that 1988 will bring a new impetus to the necessary restructuring of the Indonesian economy, but it also leaves open a possible, though not at this stage very likely, change of economic strategy

Boom · Business · Economics · Indonesian · Macroeconomics · Oil boom · Asian Studies and History · Environmental Science · Philosophy

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