The 2018 Economy and Inflation Differed from 1998

The depreciation of the rupiah to nearly Rp 15,000 per US dollar has raised concerns that Indonesia will experience a crisis similar to the 1998 crisis. This is further fueled by concerns that the rupiah's weakening is being used as a tool to gain popularity in the run-up to the political year. The crises in Venezuela, Argentina, and Turkey have added to anxieties that such a crisis will spread to Indonesia. However, Indonesia's current inflation and economy are quite controlled.

Based on data from the Central Bureau of Statistics, Indonesia's economic fundamentals in 1998 differed significantly from those in 2018. During the monetary crisis, there was a surge in prices, marked by inflation exceeding 77%. Domestic economic growth contracted (negative growth) by up to 13%. The paralysis of the national economy due to riots across the country resulted in uncontrolled inflation and economic turmoil.

Although the rupiah has recently depreciated to its worst level in 20 years, Indonesia's economic fundamentals remain under control. The domestic economy is still growing at 5%, and inflation is very controlled, in the range of 3%, as shown in the graph below. Similarly, Indonesia's foreign exchange reserves, reaching US$ 117.93 billion (equivalent to Rp 1,745.73 trillion), are sufficient to finance 6.6 months of imports, and government foreign debt that is due. This figure is above the international standard of 3 months.