The Indonesian Economy in 1986

In terms of economic performance, 1986 was the most disappointing year Indonesia has faced in the twenty-year history of the New Order. The unexpected decline in oil prices created serious difficulties in many areas. As it turned out, the government was ill equipped to absorb this external shock. It forced the government to resort to ad hoc policy reactions which cumulatively created a highly uncertain environment in which even the most irrational rumour regarding the government's new policy initiatives appeared credible to many Indonesians. The very weak performance of the economy in 1986 must have disillusioned many polidcians and technocrats who were just beginning to talk about a national project which would lay down a solid foundation for another big push in Indonesia's march towards a modern economy. This project was to be launched at the beginning of the second twenty-five years of the New Order's existence. However, this set-back cannot obscure the fact that Indonesia can continue to rely on its enormous economic potential. It may, however, persuade the government of the necessity of comprehensive economic reforms

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