Contents

• Introduction 2
• Indonesia 3
• Economical Background 4
• 1997 Crisis 4
• Core Issues that led to Crisis 6
• Road to Recovery 7
• The Role of IMF in making the turnaround 9
• Macro economical factors and forecasts 11
• Recommendations 12
• Conclusion 13

Description

Assignment description – Indonesia has now fully recovered from its collapse in 1997 due to the 1997 Asian financial crisis and is currently experiencing sound economic growth. Given this situation:
a). Identify the main economic forces in the Indonesian economy that drive growth. List as many factors as possible both domestic and international. Where appropriate, use relevant theory and graphs to support your points.
b). what is the likely impact of continuous and substantial growth on various economic variables? Identify as many macros or microeconomic factors as possible; both positive and negative.
Market economies are at times predictive and at times are totally un-predictive. Even a carefully laid down policy with all the consequences studied may not produce desired results. Some of the economies in the world are resilient. These economies are built upon solid foundation of market regulations, governmental policies, financial systems, legal systems and sound political system that does not change the market forces to a great deal. Some of the examples of such resilient economies that are built upon solid political, legal, financial systems are the USA, the UK, Japan and some of the European countries. Although, economic fortunes vary among these countries influenced by global political and economical changes and changes in domestic industrial and agricultural produce, these nations have built market systems foreseeing the entire possible scenario, even the worst and thus have worked out options to take care of all the uncertainties. However, there are some economies in the world that were benefited by default due to some of the strengths those countries possessed in the global business. The best example for such economies is the oil producing nations that have uni-dimensional policies hinged on the revenues from the export of oil. Although, these countries are flourishing due to their huge oil reserves and increased demand for oil in the world market. Indonesia is a nation that exports oil. It saw a boom in the economy in the 70s due to high oil prices. Although, the country saw high GDP growth in that decade and subsequent decades, the economy was not built upon sound financial and legal procedures (Robinson, 2009). The 1997 Asian economic crisis saw the country going to the brink (IMF, 2001). However, the country made a dramatic turnaround due to the intervention of International Monetary Fund or IMF. This paper discusses the economical background of Indonesia, 1997 economical crisis, the reasons for the 1997 crisis and the turnaround of Indonesian economy with the help of IMF.