Indonesia: an overview

An Indonesian banker counts and checks old and broken banknotes. Credit: Getty

 

Indonesia, a vast polyglot nation, has the largest national economy in south-east Asia. It has weathered the global financial crisis relatively well, outperforming most of its regional neighbours, largely because of its heavy reliance on domestic consumption as the driver of economic growth. Increasing investment from both local and foreign investors is also supporting solid growth.

Yet Indonesia struggles with inadequate infrastructure, corruption, poverty, a complex regulatory environment and unequal resource distribution among regions. President Susilo Bambang Yudhoyono and his vice-president, Boediono, have maintained a broad continuity of economic policy, although the economic reform agenda has been slowed during the first year of their term by corruption scandals and the departure of a finance minister.

In late 2010, increasing inflation, driven by higher and volatile food prices, posed an increasing challenge to economic policymakers and threatened to push millions of the near-poor below the poverty line. The government faces the ongoing challenge of improving Indonesia’s infrastructure to remove impediments to growth, while addressing climate change concerns.