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Jakarta Post

Indonesian fiscal management on brink of being unsustainable

  • Anthony Budiawan

    Jakarta

PREMIUM
Jakarta   /   Thu, January 28 2021   /  01:00 am
Cash flow: Bank Mandiri employees mark packets containing Rp 100,000 (US$7.10) banknotes at the state-owned bank’s cash center in Jakarta on March 20, 2020. (JP/Dhoni Setiawan)

The Indonesian economy has shown a weakening trend in the last 15 years (2005-2019). One of the main reasons for the weakness has been the sharp decline in export commodity prices since 2011, particularly coal, palm oil and rubber prices, which together accounted for nearly 40 percent of total non-oil and gas exports in 2011. Commodity prices initially rose rapidly until mid-2008 following the relaxation of global monetary policy, especially of the Federal Reserve during the era of Alan Greenspan. Commodity prices then fell sharply following the global financial crisis, approaching the price levels of early 2004. Fortunately, this sharp decline in commodity prices did not last long. The global quantitative easing (QE) policy to fight the global recession in 2007/2008 made commodity prices rise again. This second wave of commodity booms lasted until early 2011 before they fell sharp...