Midway through 2015, Indonesia remainsconfronted with an uncertain external environment, anddomestic economic policy challenges have intensified. GDPdecelerated to below 5 percent in the first quarter andprivate consumption expenditure, Indonesia’s engine ofgrowth in recent years, is also slowing. Weaker growth hasresulted in slower job creation, with recent employmentrising only just enough to absorb the increase in workingage population. While the commodity downturn since 2012 andpolicy response have affected output growth the most inresource-rich provinces, employment creation has come underpressure across Indonesia. Yet the scope for policy stimulusis limited and monetary policy in particular is constraineddue to sticky inflation and persistent external vulnerabilities.
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