Economic Development in Indonesia

The exchange rate crisis has lowered Indonesia's economic growth. The exchange rate had fallen sharply since July 1997 led to Indonesia's economic growth in the third quarter and fourth quarter decreased to 2.45 percent and 1.37 percent. In the first quarter and second quarter of 1997 Indonesia's economic growth was recorded at 8.46 percent and 6.77 percent. In the first quarter of 1998 recorded a negative growth of -6.21 percent.

Decline in economic growth can not be separated from the issue of private sector business conditions slowed their performance further.

This delay occurred partly due to the difficulty of imported raw materials that are not associated with receipt of the LC Indonesia and the burden of foreign debt payments are more swollen in line with the weakening of the rupiah and increasingly high rate of bank interest. The riots that hit several cities in the month of May 1998 is expected to further slow down the performance of private sector, which subsequently reduced further economic growth, particularly in the second quarter of 1998.

Meanwhile, export growth in March 1998 showed an encouraging growth in non-oil exports are about 16 percent. The growth rate was achieved thanks to an export commodity prices more competitive with the falling value of rupiah. This increase contributed to the trade surplus surged to 1.97 billion U.S. dollars compared to 206.1 million U.S. dollars in March 1997. Sharp drop in imports is another factor was the creation of surplus. Imports in March 1998 fell by 38 percent in line with declining economic growth.