This Indonesia Economic Quarterly (IEG)quarterly report covers the economic growth of Indonesia asin June 2016. With the global recovery yet to be realized,Indonesia’s resilience stands out among commodity exporters.A number of good policies have contributed to Indonesia’sresilience. First, prudent monetary and exchange ratepolicies, along with international financial conditions thatare more favorable than a year ago, have helped reduceinflation and stabilize the Rupiah. These factors, as wellas lower energy prices, have supported aggregate householdconsumption. Second, public infrastructure spending hasbecome a priority within Indonesia’s limited fiscal space.Gross domestic product (GDP) growth in first quarter (Q1)2016 was 4.9 percent year-on-year (yoy), with publicspending lower than expected. The current account deficitnarrowed to 2.1 percent of GDP, as imports fell faster thanexports. Fiscal policy in Indonesia has not been veryeffective in reducing inequality, but the fuel subsidyreform has helped. The 2015 fuel subsidy reform, and relatedcompensation for the poor, has helped reduce inequality, assavings were redirected into infrastructure, health, andsocial assistance.
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