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BRIC countries (Brazil, Russia, India and China). Another set of emerging economies -
grouped under the acronym CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and
South Africa) - also gained attention as its members have reasonably sophisticated financial
systems and fast-growing populations. Several years ago the combined gross domestic
product (GDP) of the CIVETS was predicted to account for half the global economy by 2020.
However, since the prolonged global economic slowdown after 2011 we rarely hear the terms
BRIC and CIVETS anymore.
The Indonesian government under the leadership of Joko Widodo (who was inaugurated as
Indonesia's seventh president in October 2014) has implemented several structural reforms
that aim at long-term growth but cause some short-term pain. For example, the majority of
fuel subsidies have been scrapped successfully, a remarkable accomplishment (as fuel
subsidy cuts have always caused outrage among the population) aided by the globe's low
crude oil prices. Moreover, the government places high priority on infrastructure
development (evidenced by the sharply rising government infrastructure budget) and on
investment (evidenced by deregulation and fiscal incentives that are offered to private
investors).
But back to the basics: what are Indonesia's strengths that explain structural macroeconomic
growth?
Indonesia’s micro, small and medium sized enterprises, which together account for 99
percent of the total amount of enterprises that are active in Indonesia, are important too. They
account for about 60 percent of Indonesia’s gross domestic product (GDP) and
create employment to nearly 108 million Indonesians. This implies that these micro, small
and medium sized companies are the backbone of the Indonesian economy.
There are signs that Indonesia's economic growth is starting to accelerate again after the
economic slowdown in the years 2011-2015. As such we may be at the beginning of what can
become another period of substantial economic growth. However, it should also be pointed
out that Indonesia is a complex country that contains certain risks for investments and
experiences difficulties due to the nation's unique dynamics and context. In order to be aware
of the risks involved we advise you to read our Risks of Investing in Indonesia section and to
keep track of Indonesia's latest economic, political and social developments through
our News section, Business section and Finance section.
This section provides an outline of the current state of the Indonesian economy and discusses
a number of important chapters in the economic history of Indonesia:
This section offers a detailed account regarding Indonesia's current economic structure and
composition based on recent macroeconomic indicators, developments and achievements. It
also presents an introduction to the three main economic sectors of Indonesia (agriculture,
industry and services) and expounds on the contribution of these three sectors to Indonesia's
national economy.
The Asian Financial crisis in the late 1990s was one of the biggest watersheds in Indonesian
history. Starting out as a financial crisis it quickly expanded to become a social and political
one which marked the end of Suharto's rule (that was legitimized by economic development).
Indonesia would become the country that was hit hardest by this crisis and it reversed much
of the economic progress made under the New Order regime.