Editing Economy of Indonesia (section)

==History==
{{Main|Economic history of Indonesia}}

===Sukarno era===
In the years immediately following the [[proclamation of Indonesian independence]], both the [[Japanese occupation of the Dutch East Indies|Japanese occupation]] and the [[Indonesian National Revolution|conflict between Dutch and Republican forces]] had crippled the country's production, with exports of commodities such as rubber and oil being reduced to 12 and 5% of their pre-WW2 levels, respectively.<ref name="lindblad06">{{cite journal |last1=Lindblad|first1=J. Thomas|title=Macroeconomic consequences of decolonization in Indonesia|journal=XIVth Conference of the International Economic History Association|date=2006 |url=http://www.helsinki.fi/iehc2006/papers1/Lindblad.pdf |access-date=18 August 2017|location=Helsinki|archive-url=https://web.archive.org/web/20130811000608/http://www.helsinki.fi/iehc2006/papers1/Lindblad.pdf |archive-date=11 August 2013|url-status=dead}}</ref> The first Republican government-controlled bank, the Indonesian State Bank (''[[Bank Negara Indonesia]]'', BNI) was founded on 5 July 1946. It initially acted as the manufacturer and distributor of ORI (''Oeang Republik Indonesia''/Money of the Republic of Indonesia), a currency issued by the Republican Government which was the predecessor of [[Indonesian rupiah|Rupiah]].<ref>{{cite web|title=History – BNI |url=http://www.bni.co.id/en-us/company/about-bni/history|publisher=BNI |access-date=18 August 2017|archive-date=1 July 2018|archive-url=https://web.archive.org/web/20180701222313/http://www.bni.co.id/en-us/company/about-bni/history|url-status=dead}}</ref> Despite this, currency issued during the Japanese occupation and by Dutch authorities was still in circulation, and the simplicity of the ORI made its counterfeiting relatively easy, worsening matters.<ref>{{cite news|last1=Hakiem|first1=Lukman|title=Hatta-Sjafruddin: Kisah Perang Uang di Awal Kemerdekaan|url=http://www.republika.co.id/berita/jurnalisme-warga/wacana/17/08/09/oue9d2385-hattasjafruddin-kisah-perang-uang-di-awal-kemerdekaan|access-date=18 August 2017|agency=Republika|date=9 August 2017|language=id}}</ref> Between 1949 and 1960, Indonesia experienced several economic disruptions. The country's independence [[Dutch-Indonesian Round Table Conference|recognized by the Netherlands]], the dissolution of the [[United States of Indonesia]] in 1950, the subsequent [[Liberal democracy period in Indonesia|liberal democracy period]], the nationalization of ''De Javasche Bank'' into the modern [[Bank Indonesia]],<ref>{{cite journal |last1=Lindblad |first1=J. Thomas |date=2004 | url=http://www.indie-indonesie.nl/content/documents/papers-economic%20side/Makalah-Thomas%20Lindblad.pdf |archive-url=https://web.archive.org/web/20090327003011/http://www.indie-indonesie.nl/content/documents/papers-economic%20side/Makalah-Thomas%20Lindblad.pdf |archive-date=27 March 2009 |url-status=dead | title=Van Javasche Bank naar Bank Indonesia. Voorbeeld uit de praktijk van indonesianisasi | trans-title=From Java Bank to Bank Indonesia: A Case Study of Indonesianisasi in Practice | journal=Tijdschrift voor Sociale en Economische Geschiedenis | volume=1 |pages=28–46 |language=nl}}</ref> and the takeover of Dutch corporate assets following the [[West New Guinea dispute]],<ref>{{cite journal |last1=van de Kerkhof|first1=Jasper |title=Dutch enterprise in independent Indonesia: cooperation and confrontation, 1949–1958 |journal=IIAS Newsletter|date=March 2005 |volume=36 |url=http://iias.asia/sites/default/files/IIAS_NL36_18.pdf |access-date=18 August 2017|archive-date=18 August 2017|archive-url=https://web.archive.org/web/20170818091528/http://iias.asia/sites/default/files/IIAS_NL36_18.pdf|url-status=dead}}</ref> which all resulted in the devaluation of Dutch banknotes into half their value.<ref>{{cite web|title=Period of Recognition of the Republic of Indonesia's Sovereignty up the Nationalization of DJB |url=http://www.bi.go.id/en/tentang-bi/museum/sejarah-bi/pra-bi/Documents/89b8c80249714bce8dc84a9ad1bbb1b5MicrosoftWordPeriodofRecognitionoftheRepublicofInd.pdf |publisher=Special Unit for Bank Indonesia Museum: History Before Bank Indonesia|via=Bank Indonesia |access-date=18 August 2017|archive-date=5 October 2019|archive-url=https://web.archive.org/web/20191005041254/https://www.bi.go.id/en/tentang-bi/museum/sejarah-bi/pra-bi/Documents/89b8c80249714bce8dc84a9ad1bbb1b5MicrosoftWordPeriodofRecognitionoftheRepublicofInd.pdf|url-status=dead}}</ref>

During the [[Guided Democracy in Indonesia|guided democracy era]] in the 1960s, the economy deteriorated drastically as a result of political instability. The government was inexperienced in implementing macroeconomic policies, which resulted in severe poverty and hunger. By the time of Sukarno's downfall in the mid-1960s, the economy was in chaos with 1,000% annual inflation, shrinking export revenues, crumbling infrastructure, factories operating at minimal capacity, and negligible investment.<ref>{{Cite web |title=Sukarno's economic policy left me on the brink of ruin: Mochtar Riady's story (13) |url=https://asia.nikkei.com/Spotlight/My-Personal-History/Sukarno-s-economic-policy-left-me-on-the-brink-of-ruin-Mochtar-Riady-s-story-13 |access-date=2023-03-19 |website=Nikkei Asia |language=en-GB}}</ref> Nevertheless, Indonesia's post-1960 economic improvement was considered remarkable when taking into consideration how few indigenous Indonesians in the 1950s had received a formal education under Dutch colonial policies.<ref>{{cite book|title=A History of the Global Economy. From 1500 to the Present.|author=Baten, Jörg|date=2016|publisher=Cambridge University Press|isbn=9781107507180|page=292}}</ref>

===New Order===
Following President Sukarno's downfall, the New Order administration brought [[Austerity|a degree of discipline]] to economic policy that quickly brought inflation down, stabilized the currency, rescheduled foreign debt, and attracted foreign aid and investment. (See [[Inter-Governmental Group on Indonesia]] and [[Berkeley Mafia]]). Indonesia was until recently Southeast Asia's only member of OPEC, and the 1970s [[price of oil|oil price]] rise provided an export revenue windfall that contributed to sustained high economic growth rates, averaging over 7% from 1968 to 1981.<ref name="SCHWARZ">Schwarz (1994), pp. 52–7.</ref>

With high levels of regulation and dependence on declining oil prices, growth slowed to an average of 4.5% per annum between 1981 and 1988. A range of economic reforms was introduced in the late 1980s, including a managed devaluation of the rupiah to improve export competitiveness, and deregulation of the financial sector.<ref name="SCHWARZ"/> Foreign investment flowed into Indonesia, particularly into the rapidly developing export-oriented manufacturing sector, and from 1989 to 1997, the Indonesian economy grew by an average of over 7%.<ref name="SCHWARZ"/><ref>{{cite web|title=Indonesia: Country Brief|work=Indonesia: Key Development Data & Statistics|publisher=The World Bank|date=September 2006|url=http://web.worldbank.org/WBSITE/EXTERNAL/COUNTRIES/EASTASIAPACIFICEXT/INDONESIAEXTN/0,,contentMDK:20095968~pagePK:141137~piPK:141127~theSitePK:226309,00.html}}</ref> GDP per capita grew 545% from 1970 to 1980 as a result of the sudden increase in oil export revenues from 1973 to 1979.<ref>{{cite web|url=http://earthtrends.wri.org/text/economics-business/variable-638.html|title=GDP info|publisher=Earthtrends.wri.org|access-date=29 August 2011|url-status=dead|archive-url=https://web.archive.org/web/20090220134324/http://earthtrends.wri.org/text/economics-business/variable-638.html|archive-date=20 February 2009|df=dmy }}</ref> High levels of economic growth masked several structural weaknesses in the economy. It came at a high cost in terms of weak and corrupt governmental institutions, severe public indebtedness through mismanagement of the financial sector, rapid depletion of natural resources, and culture of favors and corruption in the business elite.<ref>{{cite web|url=http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf|title=Combating Corruption in Indonesia, World Bank 2003|access-date=29 August 2011|archive-url=https://web.archive.org/web/20050121162752/http://siteresources.worldbank.org/INTINDONESIA/Resources/Publication/03-Publication/Combating+Corruption+in+Indonesia-Oct15.pdf|archive-date=21 January 2005|url-status=dead}}</ref>

Corruption particularly gained momentum in the 1990s, reaching to the highest levels of the political hierarchy as [[Suharto]] became the most corrupt leader according to [[Transparency International]].<ref>{{cite web|url=http://www.transparency.org/publications/gcr/gcr_2004|title=Transparency International Global Corruption Report 2004|publisher=Transparency.org|access-date=29 August 2011|url-status=dead|archive-url=https://web.archive.org/web/20110902223424/http://www.transparency.org/publications/gcr/gcr_2004|archive-date=2 September 2011}}</ref><ref>{{cite news|url=http://news.bbc.co.uk/2/hi/3567745.stm|title=Suharto tops corruption rankings|work=BBC News|date=25 March 2004|access-date=29 August 2011}}</ref> As a result, the legal system was weak, and there was no effective way to enforce contracts, collect debts, or sue for bankruptcy. Banking practices were very unsophisticated, with collateral-based lending the norm and widespread violation of prudential regulations, including limits on connected lending. Non-tariff barriers, rent-seeking by state-owned enterprises, domestic subsidies, barriers to domestic trade and export restrictions all created economic distortions.

The [[1997 Asian financial crisis]] that began to affect Indonesia became an economic and political crisis. The initial response was to float the rupiah, raise key domestic interest rates, and tighten fiscal policy. In October 1997, Indonesia and the [[International Monetary Fund]] (IMF) reached an agreement on an economic reform program aimed at macroeconomic stabilization and the elimination of some of the country's most damaging economic policies, such as the National Car Program and the [[clove]] monopoly, both involving family members of Suharto. The rupiah remained weak, however, and Suharto was forced to resign in May 1998 after [[May 1998 riots of Indonesia|massive riots erupted]]. In August 1998, Indonesia and the IMF agreed on an Extended Fund Facility (EFF) under President [[B. J. Habibie]] that included significant structural reform targets. President [[Abdurrahman Wahid]] took office in October 1999, and Indonesia and the IMF signed another EFF in January 2000. The new program also has a range of economic, structural reform, and governance targets.

The effects of the crisis were severe. By November 1997, rapid currency depreciation had seen public debt reach US$60 billion, imposing severe strains on the government's budget.<ref>{{cite news|last=Robison|first=Richard|title=A Slow Metamorphosis to Liberal Markets|newspaper=Australian Financial Review|date=17 November 2009}}</ref> In 1998, real GDP contracted by 13.1%, and the economy reached its low point in mid-1999 with 0.8% real GDP growth. Inflation reached 72% in 1998 but slowed to 2% in 1999. The rupiah, which had been in the RP 2,600/USD1 range at the start of August 1997 fell to 11,000/USD1 by January 1998, with spot rates around 15,000 for brief periods during the first half of 1998.<ref>{{cite web|url=http://www.oanda.com/convert/fxhistory|title=Historical Exchange Rates|publisher=OANDA|date=16 April 2011|access-date=29 August 2011}}</ref> It returned to the 8,000/USD1 range at the end of 1998 and has generally traded in the Rp 8,000–10,000/USD1 range ever since, with fluctuations that are relatively predictable and gradual. However, the rupiah began devaluing past 11,000 in 2013, and as of November 2016 is around 13,000 Rp/USD1.<ref>{{Cite web|title=XE: USD / IDR Currency Chart. US Dollar to Indonesian Rupiah Rates|url=https://www.xe.com/currencycharts/?from=USD&to=IDR&view=10Y|website=xe.com|access-date=2020-05-06}}</ref>

===Reform era===
Since an inflation target was introduced in 2000, the GDP deflator and the [[Consumer price index|CPI]] have grown at an average annual pace of 10¾% and 9%, respectively, similar to the pace recorded in the two decades prior to the 1997 crisis, but well below the pace in the 1960s and 1970s.<ref>{{cite web|url= https://socialhistory.org/sites/default/files/docs/ecgrowtheng.pdf |title=Indonesia's growth experience in the 20th century: Evidence, queries, guesses|author=van der Eng, Pierre |publisher=Australian National University|date=4 February 2002 |access-date=10 October 2017|archive-url=https://web.archive.org/web/20171010152026/https://socialhistory.org/sites/default/files/docs/ecgrowtheng.pdf |archive-date=10 October 2017|url-status=dead}}</ref> Inflation has also generally trended lower through the 2000s, with some of the fluctuations in inflation reflecting government policy initiatives such as the changes in fiscal subsidies in 2005 and 2008, which caused large temporary spikes in CPI growth.<ref name="efm.bris.ac.uk">{{cite web|url=http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp01522.pdf|title=Growing into trouble: Indonesia after 1966 |author=Temple, Jonathan|publisher=University of Bristol|date=15 August 2001|access-date=27 December 2016|url-status=dead|archive-url=https://web.archive.org/web/20161227202512/http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp01522.pdf |archive-date=27 December 2016}}</ref>

[[File:Historical economic growth of Indonesia.jpg|thumb|left |Historical GDP per capita development of Indonesia]]
{|class="wikitable floatright"
! style="text-align:center; background:#cfb;" colspan="2"|Share of world GDP (PPP)<ref name="2025/04">{{cite web |title=Report for Selected Countries and Subjects |url=https://www.imf.org/en/Publications/WEO/weo-database/2025/April/weo-report?c=536,&s=NGDP_RPCH,NGDPD,NGDPDPC,PPPPC,PPPSH,PCPIPCH,GGXWDN_NGDP,BCA_NGDPD,&sy=1980&ey=2030&ssm=0&scsm=1&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1 |website=IMF.org |publisher=International Monetary Fund |access-date=6 May 2025}}</ref>
|-
! style="background:#cfb;"|Year
! style="background:#cfb;"|Share
|-
|style="text-align:left;"|1980||style="text-align:right;"|1.24%
|-
|style="text-align:left;"|1990||style="text-align:right;"|1.68%
|-
|2000
|style="text-align:right;"|1.7%
|-
|2010
|style="text-align:right;"|2.07%
|-
|2020
|style="text-align:right;"|2.31%
|-
|2025
|style="text-align:right;"|2.42%
|}

In late 2004, Indonesia faced a 'mini-crisis' due to [[World oil market chronology from 2003|international oil prices rises]] and imports. The currency exchange rate reached Rp 12,000/USD1 before stabilizing. Under President [[Susilo Bambang Yudhoyono]] (SBY), the government was forced to cut its massive fuel subsidies, which were planned to cost $14 billion in October 2005.<ref>{{cite news|last=BBC News|title=Indonesia plans to slash fuel aid|publisher=BBC, London|date=31 August 2005|url=http://news.bbc.co.uk/2/hi/business/4200100.stm }}</ref>

As of February 2007, the unemployment rate was 9.75%.<ref>{{cite press release|publisher=Indonesian Central Statistics Bureau |title=Beberapa Indikator Penting Mengenai Indonesia|date=2 December 2008|url=http://www.bps.go.id/leaflet/leaflet-desember-07-ind.pdf |language=id|access-date=18 March 2008|url-status=dead|archive-url=https://web.archive.org/web/20080401200753/http://www.bps.go.id/leaflet/leaflet-desember-07-ind.pdf |archive-date=1 April 2008 }}</ref> Despite a slowing global economy, Indonesia's economic growth accelerated to a ten-year high of 6.3% in 2007. This growth rate was sufficient to reduce poverty from 17.8% to 16.6% based on the government's poverty line and reversed the recent trend towards [[jobless recovery|jobless growth]], with unemployment falling to 8.46% in February 2008.<ref>{{cite press release|title=Indonesia: Economic and Social update|publisher=[[World Bank]]|year=2008|access-date=2 April 2008|url=http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/06/19/000333037_20080619004758/Rendered/PDF/442730WP0BOX321ate1apr200801PUBLIC1.pdf|url-status=dead|archive-url=https://web.archive.org/web/20110607014451/http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2008/06/19/000333037_20080619004758/Rendered/PDF/442730WP0BOX321ate1apr200801PUBLIC1.pdf|archive-date=7 June 2011}}</ref><ref>{{cite press release|title=Indonesia: BPS-STATISTICS INDONESIA STRATEGIC DATA|publisher=BPS-Statistic Indonesia|year=2009 |url=http://www.bps.go.id/eng/download_file/data_strategis.pdf |access-date=5 November 2008|url-status=dead|archive-url=https://web.archive.org/web/20101113161704/http://www.bps.go.id/eng/download_file/data_strategis.pdf|archive-date=13 November 2010}}</ref> Unlike many of its more export-dependent neighbors, Indonesia has managed to skirt the recession helped by strong domestic demand (which makes up about two-thirds of the economy) and a government fiscal stimulus package of about 1.4% of GDP. After India and China, Indonesia was the third-fastest growing economy in the G20. With the $512 billion economy expanded 4.4% in the first quarter from a year earlier and last month, the IMF revised its 2009 Indonesia forecast to 3–4% from 2.5%. Indonesia enjoyed stronger fundamentals with the authorities implemented wide-ranging economic and financial reforms, including a rapid reduction in public and external debt, strengthening of corporate and banking sector balance sheets and reducing bank vulnerabilities through higher capitalization and better supervision.<ref>{{cite web |url=http://www.imf.org/external/pubs/ft/survey/so/2009/car072809b.htm|title=IMF Survey: Indonesia's Choice of Policy Mix Critical to Ongoing Growth|publisher=Imf.org|date=28 July 2009|access-date=29 August 2011}}</ref>

In 2012, Indonesia's real GDP growth reached 6%, then it steadily decreased below 5% until 2015. After Joko Widodo succeeded SBY, the government took measures to ease regulations for foreign direct investments to stimulate the economy.<ref>{{Cite magazine |url=https://time.com/4416354/indonesia-joko-jokowi-widodo-terrorism-lgbt-economy/|title=Indonesian President Joko 'Jokowi' Widodo Two Years On|magazine=Time|access-date=2018-05-07}}</ref> Indonesia managed to increase their GDP growth slightly above 5% in 2016–2017.<ref>{{Cite news |url=https://www.bloomberg.com/news/articles/2017-12-27/jokowi-heads-to-2018-with-backing-of-stronger-indonesian-economy|title=Jokowi Heads to 2018 With Backing of Stronger Indonesian Economy|work=Bloomberg.com|access-date=2018-05-07}}</ref> However, the government is currently still facing problems such as currency weakening, decreasing exports and stagnating consumer spending.<ref>{{Cite news |url=https://www.bloomberg.com/news/articles/2018-05-07/indonesia-s-economy-expands-at-slower-pace-than-forecast|title=Indonesian GDP Growth Disappoints, Adding to Currency Woes |work=Bloomberg.com|access-date=2018-05-07}}</ref><ref>{{Cite web |url=https://asia.nikkei.com/Economy/Indonesian-GDP-growth-falls-short-in-1Q-pressuring-President-Widodo|title=Indonesian GDP growth falls short in 1Q, pressuring President Widodo |website=Nikkei Asian Review-GB|access-date=2018-05-07}}</ref> The current unemployment rate for 2019 is at 5.3%.<ref>{{Cite web |title=World Economic Outlook (April 2020) - Unemployment rate |url=https://www.imf.org/external/datamapper/LUR@WEO/IDN?zoom=IDN&highlight=IDN|access-date=2020-07-04|website=www.imf.org}}</ref>

Reform happened in Indonesia around the 1980s, when the Indonesian government states it will be attempting to economically integrate with global economies. They stated in 2017 that "Globalisation has made it difficult for the Indonesian economy to balance all other factors of the economy".{{citation needed|date=September 2022}}