Indonesia's two deep economic crises: the mid 1960s and late 1990s

This paper discusses the two deep economic crises experienced by Indonesia, namely the crisis of the mid 1960s and the crisis of the late 1990s. The two deep economic crises of the mid 1960s and late 1990s led to a serious economic contraction, −3.0% in 1963 and an even more serious −13.1% in 1998, and to a steep rise in poverty. The crisis of the mid 1960s was caused by internal factors, namely the utter neglect of sound economic policies. By contrast, the crisis of the late 1990s was triggered by external factors, namely a sudden shift in market sentiments among foreign creditors and investors, which led to panic Comparing these two deep economic crises is of interest since it indicates that an economy depending on only one (but unsustainable) institution, a strong president, is vulnerable to internal or external shocks. These crises in their different origins and manifestations show the importance of ‘good governance’ and strong, viable institutions.