Indonesia: Long Road to Recovery
AbstractThis paper examines the collapse of the Indonesian economy in late 1997 and 1998, and analyses the most pressing economic problems inhibiting its recovery. It explores several weaknesses that emerged in the economy in the early 1990s, including a high dependence on short-term foreign borrowing, a weak banking system, a modestly overvalued exchange rate, and the seemingly unbridled growth of the business interests of the family and associates of President Suharto. These problems were serious, and they made the economy vulnerable to a significant slowdown. However, on their own, they cannot explain the magnitude and speed of the Indonesian collapse. Mismanagement of the crisis by the Indonesian government, especially President Suharto, and by the International Monetary Fund made the contraction much deeper than was necessary or inevitable. Looking ahead, the major ingredient necessary for economic recovery is a political stability, which depends on smooth parliamentary and presidential elections in 1999. On the economic front, the main challenges that lie ahead are the reorganization and recapitalization of the banking system, restructuring of corporate debt, stimulating exports, and containing the budget deficit.
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Bibliographic InfoPaper provided by Harvard - Institute for International Development in its series Papers with number 722.
Length: 26 pages
Date of creation: 1999
Date of revision:
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Postal: CAER Project, Harvard Institute for International Development, 14 Story Street, Cambridge MA 02138O
Web page: http://www.hiid.harvard.edu/
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- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East
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