Indonesia: Ten years after the economic crisis

This article discusses the country's recovery from the crisis and reforms that were undertaken to support the recovery process. It argues that thanks to sound macroeconomic policies and reforms in the financial sector and the economy more broadly, recovery eventually came to fruition, even though it took longer than in other crisis-affected countries in the region. But the article also argues that it is not always the case that major reforms necessarily guarantee continued macroeconomic stability and sustainable economic growth. It shows that the Indonesian economy remains very vulnerable, and that there is not a better symptom of this than the mini crisis that hit the country in 2005, just a year after recovery from the 1997 crisis had been fully achieved. The article points out that, in addition to the remaining weaknesses Indonesia still faces-fiscal deficit, government debt and relatively low foreign reserves, two drawbacks characterise the economy nowadays: the relatively slow growth performance of the productive sectors and the increased dependence on short-term capital flows.