Indonesia Macroeconomic 2007


The year 2007 witnessed a remarkable achievement of the Indonesian economy most notably in key areas despite mounting external pressures. For the first time since the crisis, the economy grew at rapid level above 6%, with macroeconomic stability kept in check. The favorable performances were reflected in significant surplus of balance of payments, reinforcing the international reserves, exchange rate stability, strong credit expansion and inflation under controlled. Soaring international commodity prices, led by oil, and the unfolding of the subprime mortgage crisis figured prominently among the challenges confronting the Indonesian economy had appeared to show a higher level of resilience in support of economic growth.

Indonesia’s improved economic resilience has been built upon a combination of macroeconomic and sectoral policies. Monetary and fiscal policy coordination has been markedly strengthened. The Government and Bank Indonesia have been in close collaboration in the delivery of economic stimulus and safeguarding economic stability. In the monetary sector, the pursuit of prudent and consistent policies responses have contributed to keeping inflation on a medium to long-term downward trend. Fiscal sustainability has also been safeguard through appropriate control over strategic commodity prices. The banking system has been steady progress as reflected in a raise in the intermediary function and strengthened institutions, including the accelerated development of Sharia banking. At the sectoral level, the government has sought to improve the quality of economic growth through improvements in the investment climate, accelerated construction of infrastructure, empowerment of MSMEs and the financial sector reform.

On the external front, the Indonesian economy is expected to encounter onerous challenges arising from global economy turbulence. Accordingly, economic growth is predicted to slow down in 2008 compared to 2007. Inflation is higher than the established target, while the rupiah exchange rate is expected to remain stable. Looking ahead, the synergy in monetary and fiscal policy will become more essential to mitigate the prevailing of risks. In this regard, Bank Indonesia will continue the pursuit of consistent monetary policy directed in containing inflation so as to support sustainable economic growth. In the banking sector, Bank Indonesia will focus on improvement of the banking intermediary function and the institutional strengthening of the banking system. At the same time, the strengthening of economic competitiveness, including improvements to the investment climate and accelerated construction of infrastructure, will become increasingly important in paving the way for higher levels of growth in a structurally more robust economy.

Sources: BPS-Statistics Indonesia

Bank Indonesia