Indonesia rose from the ruins of the 1997-1998 financial crisis in a commendable fashion. Economic recovery from a historically unprecedented double-digit recession was followed by decades of solid growth of just over 5 per cent (Figure 1). This led to more than doubling of per capita GDP between 1998 (the nadir of the Asian Financial Crisis) and 2019 (Figure 2). Furthermore, Indonesia managed to consolidate democratic and decentralized governance in a country with an entrenched tradition of an authoritarian and centralized political system.

As data from the national statistical agency (BPS) show, poverty has come down significantly over the last decade and is now below 10 percent based on a national poverty line. Unemployment too has come down from double digits to a little over 5 per cent. Of course, there are persistent labour market challenges: a high degree of informality, a significant proportion of the population at risk of poverty, more than 20 percent of young Indonesians who are not in employment, education or training (NEET), and persistent gender disparities. Despite these challenges, one cannot overlook Indonesia’s achievements after the 1997/1998 Asian financial crisis.

The pernicious influence of the current global pandemic – COVID-19 – has not escaped Indonesia. It has affected both lives and livelihoods and is threatening the country’s sustained increase in living standards. So far, there has been more than 100,000 cases and nearly 5,000 deaths (Johns Hopkins University as at July 30).

The GDP growth projections for 2020 are universally negative, ranging from moderate to severe (Figure 3). This is the result of mobility restrictions and partial lockdowns to contain the pandemic with their inevitable dampening effect on economic activity.

It is worth noting that even the most pessimistic projection does not come close to the double digit recession of the late 1990s. Still, like many nations today, Indonesia faces an uncertain future as it seeks to cope with the malevolent consequences of the current global pandemic.

Alternative growth projections for Indonesia – ADB, IMF, OECD, World Bank. OECD has two scenarios: (a) pandemic is time-bound with a ‘single hit’; (b) pandemic has a second wave and economy suffers a ‘double hit’
Source: World Bank


Iyanatul (Yan) Islam is an Adjunct Professor at the Griffith Asia Institute and former Branch Chief, ILO, Geneva. The views expressed in this blog are the author’s own and should not be attributed to the ILO.