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March 2017 Indonesia Economic Quarterly: Staying the Course

The World Bank recently published Indonesia Economic Quarterly, which reports on the key developments over the past three months in Indonesia’s economy and provides a more in-depth examination of selected economic and policy issues, and analysis of Indonesia’s medium-term development challenges.

Report key findings:

  • Economic growth increased for the first time in five years, rising up to 5.0 percent in 2016 from a revised 4.9 percent in 2015, despite heightened global policy uncertainty. A stable Rupiah, record low inflation, declining unemployment and soaring real wages lifted consumer confidence and private consumption. In contrast, falling government expenditure and weaker investment growth weighed on overall economic growth for the year.
  • The fundamentals of the Indonesian economy remain strong, with a robust rate of economic growth, the current account deficit and unemployment at multi-year lows, a conservative fiscal deficit and inflation at a record low.  Poverty and inequality also decreased in 2016.
  • Fiscal policy credibility was enhanced by cuts in government expenditure, along with the more achievable revenue targets in the 2017 Budget, which bolstered investor confidence.  The fiscal deficit in 2016 was 2.5 percent of GDP, lower than expected from 2.6 percent in 2015.

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