Indonesia is South-East Asia’s largest economy, but with widespread poverty and unemployment it is also one of the most fragile. It was hit particularly hard by the Asian financial crisis in 1997.
Al Jazeera’s correspondent Step Vaessen, reporting from Jakarta, said that unlike developed countries, Indonesia’s main worry from the current crisis is not the security of the banking sector, but rather that falling global demand for exports could have a massive impact on jobs.
Around 40 per cent of Indonesians live around the poverty line of about $2 a day and do not have savings in banks.
In an effort to make the economy less vulnerable, the government has said it will try to increase export markets for Indonesian products and decrease imports of unessential items.
Indonesia’s economy grew 6.3 per cent last year – the fastest pace since it was ravaged by the 1997 Asia financial crisis – pushed by strong exports of commodities including palm oil, rubber, gas and a steady drop in interest rates.
However, analysts expect global demand for the country’s commodities and mining products, which account for a major share of its exports, to weaken as a result of the current global financial turmoil.
On Monday Indonesia is also due to release inflation data for the month of September, which is expected to show a rise to a two-year high of 12 per cent, enough to persuade the central bank to raise interest rates despite the threat of the credit crisis.
Sri Mulyani Indrawati, the finance minister, said on Sunday that Indonesia’s economic growth was likely to slow next year because of the global financial crisis although the government expected to meet several economic targets for this year.