Fiscal policy strangling Indonesia

A slowdown in Indonesia will result from its tight, IMF-induced fiscal policy.

Compared to other countries in the region, economic performance has been disappointingly modest in Indonesia since the Asian liquidity crisis. Overly tight fiscal policy courtesy of the IMF has prevented any recovery of domestic investment, containing gross domestic product growth. Without increased public sector expenditure, Indonesia's one-dimensional economic growth will slow in 2005, triggering capital flight and rupiah depreciation.

Regional Laggard

Between 1999 and 2003, annual average GDP growth in Indonesia was 3.4%. Over the same period the annual average rate of GDP growth was 4% in the Philippines, 4.7% in Thailand and 4.8% in Malaysia.

Indonesia's economic growth during the past several...

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