World Bank2014-04-152014-04-152014-03https://hdl.handle.net/10986/17792Indonesia's economy continues to adjust to weaker terms of trade and tighter external financing conditions, with the composition of growth tilting more towards net exports, and economic growth slowing moderately. While this shift is positive for macroeconomic stability, it has to date been based primarily on tighter monetary policy and the depreciation of the Rupiah in 2013, the effects of which are continuing to play out. To further reduce Indonesia's vulnerability to external shocks, to minimize the risks of a more marked cyclical slowdown in growth, and to convert the near-term macro adjustment into strong, sustained growth over the longer term, further progress on long-standing policy priorities is warranted. Progress in three key areas can support both near-term macro stability and Indonesia's long-term economic prospects. First, there is a need to support domestic and foreign investor confidence. Recent policy and regulatory developments, including the partial ban on mineral exports, have increased uncertainty, may weigh on investment across the economy, and compound the usual difficulty of predicting policy ahead of elections. Given rising fiscal pressures from slower revenue growth and higher fuel subsidy costs, the second priority is to broaden the revenue base and improve the quality of spending, notably by reducing energy subsidy expenditure. These measures would also increase available fiscal space for more equitable, pro-growth spending. Third, credible progress is needed on addressing structural impediments to stronger and more inclusive growth, namely infrastructure and worker skills gaps, and factor and product market constraints. The policy environment is naturally constrained ahead of legislative elections in April and the presidential election in July. However, in light of ongoing economic risks and Indonesia's ambitious development agenda, laying the groundwork for future reforms, minimizing policy uncertainty, and making continued reform progress in some areas, should remain a priority.en-USCC BY 3.0 IGOACCOUNTINGADVERSE EFFECTSAGRICULTUREARREARSBALANCE OF PAYMENTSBALANCE SHEETSBANK ASSETSBANK LENDINGBANKING SECTORBANKING SECTOR ASSETSBANKING SYSTEMBASIS POINTSBENCHMARKBILLBONDBOND YIELDSBONDSBORROWING COSTSBUDGET DEFICITCAPITAL ADEQUACYCAPITAL GOODSCAPITAL GOODS IMPORTSCAPITAL INFLOWSCAPITAL INVESTMENTCAPITAL OUTFLOWSCOMMERCIAL BANKCOMMERCIAL BANK CREDITCOMMERCIAL BANK LENDINGCOMMERCIAL BANKSCOMMODITY PRICECOMMODITY PRICESCONSUMER CREDITCONSUMER GOODSCONSUMER PRICE INDEXCONSUMERSCONSUMPTION EXPENDITURECORE INFLATIONCREDIT GROWTHCURRENCY DEPRECIATIONCURRENCY HEDGINGCURRENT ACCOUNTCURRENT ACCOUNT BALANCECURRENT ACCOUNT DEFICITDEBTDEBT ISSUANCEDEBT REPAYMENTSDECLINE IN INVESTMENTDEFICITSDEFLATIONDEPENDENCY RATIODEPOSITDEPOSITSDIRECT INVESTMENTDISBURSEMENTDISBURSEMENTSDOMESTIC BONDSDOMESTIC CURRENCYDOMESTIC DEMANDDOMESTIC EQUITIESDOMESTIC GOVERNMENT BONDSECONOMIC ASSUMPTIONSECONOMIC CONDITIONSECONOMIC DEVELOPMENTECONOMIC GROWTHECONOMIC PERFORMANCEECONOMIC RISKSEMERGING ECONOMIESEMERGING ECONOMYEMERGING MARKETEMERGING MARKET ECONOMIESEMERGING MARKET ECONOMYEQUIPMENTEQUITY INDICESEQUITY MARKETSEXCHANGE RATEEXCHANGE RATESEXPENDITUREEXPENDITURESEXPORT GROWTHEXPORT VOLUMESEXPORTERSEXPORTSEXTERNAL BALANCEEXTERNAL BALANCESEXTERNAL DEBTEXTERNAL DEMANDEXTERNAL FINANCINGEXTERNAL SHOCKSFEDERAL RESERVEFINANCIAL ASSETSFINANCIAL CRISISFINANCIAL MARKETFINANCIAL MARKET PARTICIPANTSFINANCIAL MARKETSFINANCING REQUIREMENTSFISCAL BURDENFISCAL DEFICITFISCAL POLICYFISCAL REFORMSFIXED CAPITALFIXED INVESTMENTFLEXIBLE EXCHANGE RATEFOREIGN CAPITALFOREIGN CURRENCYFOREIGN EXCHANGEFOREIGN EXCHANGE MARKETFOREIGN EXCHANGE RESERVEFOREIGN FINANCINGFOREIGN INVESTORFOREIGN INVESTORSGDP DEFLATORGLOBAL ECONOMYGOVERNMENT BONDGOVERNMENT BOND YIELDSGOVERNMENT BONDSGOVERNMENT DEBTGOVERNMENT SPENDINGGROSS DOMESTIC PRODUCTGROSS FIXED CAPITAL FORMATIONGROWTH RATEIMPORTIMPORT COMPRESSIONIMPORT COSTSIMPORT DEMANDIMPORT GROWTHIMPORTSINCOMEINCOME TAXINCOME TAXESINDEXATIONINFLATIONINFLATIONARY PRESSURESINFRASTRUCTURE DEVELOPMENTINSTITUTIONAL CAPACITYINTEREST RATEINTEREST RATESINTERNATIONAL BANKINTERNATIONAL DEVELOPMENTSINTERNATIONAL MARKETINVESTINGINVESTMENT CLIMATEINVESTMENT FLOWSINVESTMENT INFLOWSINVESTMENT POLICYINVESTOR CONFIDENCELABOR FORCELEADING INDICATORSLIABILITYLIQUIDITYLIQUIDITY RISKSLOANLOCAL CURRENCYMACROECONOMIC ADJUSTMENTMACROECONOMIC ADJUSTMENTSMACROECONOMIC INDICATORSMACROECONOMIC MANAGEMENTMACROECONOMIC STABILITYMACROECONOMIC STABILIZATIONMARKET CONDITIONSMARKET CONFIDENCEMARKET CONSTRAINTSMARKET LIQUIDITYMARKET PRICESMARKET TRADINGMATURITYMONETARY POLICYMONEY MARKETMONEY MARKET RATESNET EXPORTSNOMINAL INTEREST RATENON-PERFORMING LOANOIL PRICEOIL PRICESOPPORTUNITY COSTSOUTSTANDING CREDITOUTTURNPORTFOLIOPORTFOLIO INFLOWSPORTFOLIO INVESTMENTPOTENTIAL OUTPUTPOVERTY REDUCTIONPRICE INCREASEPRICE INCREASESPRICE TRANSPARENCYPRICE VOLATILITYPRIVATE BORROWINGPRIVATE CONSUMPTIONPRODUCTIVITY GROWTHREAL CONSUMPTIONREAL EFFECTIVE EXCHANGE RATEREAL GDPREAL IMPORTSREAL INTERESTREAL INTEREST RATESREPORESERVE REQUIREMENTRESERVESRETURNRISK FACTORRISK PROFILESHORT-TERM DEBTSHORT-TERM EXTERNAL DEBTSHORTFALLSSLOWDOWNSTOCKSSUPPLY-SIDESURPLUSSUSTAINABLE GROWTH RATESWAPTAXTAX COLLECTIONTAX REVENUESTRADE BALANCETRADE IMPACTTRADE IMPACTSTRADINGTRADING PARTNERUNCERTAINTYUNEMPLOYMENTUNEMPLOYMENT RATEUPWARD PRESSUREWEALTHWITHDRAWALWORKING CAPITAL10.1596/17792