Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties

Reza Siregar and Monica Wihardja

MPRA Paper from University Library of Munich, Germany

Abstract: Amid global financial turbulent, the economy of Indonesia posted an annual average growth of above 6 per cent between 2008 and 2012, except in 2009. This was arguably among the most stable growth performance among the regional economies of East and Southeast Asia. The strength of domestic demand has indeed been a primary driver of the remarkably stable growth performance. However, the uncertainties with the advanced economies, particular in the US and the European Union, had negatively affected the local economy and exposed a number of apparent weaknesses with the Indonesian economy. A couple of these vulnerabilities are worth highlighted as they are arguably structural in nature. First is the country banking sector’s exposure to global cross-border bank lending activities. Second factor has to do with the persistent current account deficit and its link to long-standing fiscal policy of fuel subsidy and global commodity market.

Keywords: Current Account; Capital Account; Global Financial Crisis; Energy Subsidy and Commodities (search for similar items in EconPapers)
JEL-codes: E50 E60 F41 (search for similar items in EconPapers)
Date: 2013-08-15
New Economics Papers: this item is included in nep-mac and nep-sea
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