Indonesia Economic Quarterly, June 2010

Abstract

The Indonesian economic quarterly reports on and synthesizes the past three months' key developments in Indonesia's economy. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy for the outlook for Indonesia's economic and social welfare. Its coverage ranges from the macro economy to financial markets to indicators of human welfare and development. It is intended for a wide audience, including policy makers, business leaders, financial market participants, and the community of analysts and professionals engaged in Indonesia's evolving economy. Through an uncertain environment, Indonesia's economy continued to consolidate its recovery from the global economic and financial crisis. As expected, growth moderated in the first quarter of 2010, but remained above pre-crisis averages, and appears to have accelerated in the second. Price growth remained relatively modest for the most part, supporting consumers' spending power. International financial flows remained large but volatile, continuing to challenge policy makers. Further large flows in March and April into liquid Indonesian financial assets reversed during the volatility in global financial markets in May. But the authorities appear to have managed this well and the impact on local financial markets was comparatively small. The economy is expected to gradually accelerate through 2011, largely due to domestic demand. The renewed volatility in global financial conditions and uncertain developed economy outlook has increased the near term downside risks to forecasts, while domestic political developments appear to be increasing the longer-term risk that the government falls short of its ambitious reform agenda required to lift growth above 7 percent by mid-decade.