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Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties

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  • Siregar, Reza
  • Wihardja, Monica

Abstract

Amid global financial turbulent, the economy of Indonesia posted an annual average growth of above 6 per cent between 2008 and 2012, except in 2009. This was arguably among the most stable growth performance among the regional economies of East and Southeast Asia. The strength of domestic demand has indeed been a primary driver of the remarkably stable growth performance. However, the uncertainties with the advanced economies, particular in the US and the European Union, had negatively affected the local economy and exposed a number of apparent weaknesses with the Indonesian economy. A couple of these vulnerabilities are worth highlighted as they are arguably structural in nature. First is the country banking sector’s exposure to global cross-border bank lending activities. Second factor has to do with the persistent current account deficit and its link to long-standing fiscal policy of fuel subsidy and global commodity market.

Suggested Citation

  • Siregar, Reza & Wihardja, Monica, 2013. "Fragile Balance of Payment in Indonesia in the Midst of Recent Global Economic Uncertainties," MPRA Paper 49027, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:49027
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    References listed on IDEAS

    as
    1. Kulwant Rai & Herman Kamil, 2010. "The Global Credit Crunch and Foreign Banks’ Lending to Emerging Markets: Why Did Latin America Fare Better?," IMF Working Papers 2010/102, International Monetary Fund.
    2. de Haas, Ralph & van Lelyveld, Iman, 2010. "Internal capital markets and lending by multinational bank subsidiaries," Journal of Financial Intermediation, Elsevier, vol. 19(1), pages 1-25, January.
    3. Victor Pontines & Reza Siregar, 2012. "How Should We Bank With Foreigners? An Empirical Assessment of Lending Behaviour of International Banks to Six East Asian Countries," CAMA Working Papers 2012-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    4. Victor Pontines & Reza Y. Siregar, 2012. "How Should We Bank With Foreigners?—An Empirical Assessment of Lending Behavior of International Banks to Six East Asian Economies," Finance Working Papers 23347, East Asian Bureau of Economic Research.
    5. Pontines, Victor & Siregar, Reza Y., 2014. "How should we bank with foreigners? An empirical assessment of lending behavior of international banks to six East Asian economies," International Review of Economics & Finance, Elsevier, vol. 29(C), pages 552-568.
    6. Siregar, Reza Y., 2002. "Interest Rate Policy And Its Implication On The Banking Restructuring Programs In Indonesia During The 1997-Financial Crisis: An Empirical Investigation," EIJS Working Paper Series 154, Stockholm School of Economics, The European Institute of Japanese Studies.
    7. Reza Yamora SIREGAR & Vincent Choon Seng LIM, 2010. "The Role of Central Banks in Sustaining Economic Recovery and in Achieving Financial Stability," Journal of Advanced Studies in Finance, ASERS Publishing, vol. 1(1), pages 83-99.
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    More about this item

    Keywords

    Current Account; Capital Account; Global Financial Crisis; Energy Subsidy and Commodities;
    All these keywords.

    JEL classification:

    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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