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Overview of Indonesia and its Economy1.7.3 Economic growth—historical and forecastIndonesia has been known for its vest oil reserves and the Government has placed great importance onmanaging this resource. During the 1970s, Indonesia benefited from rising oil prices and this resulted inlarge export revenues for the country.From 1968 to 1981, Indonesia’s GDP grew steadily. However, growth slowed subsequently in 1987 as aresult of declining oil prices. Indonesia at this time was heavily dependant on oil revenues and this wascompounded by inefficiencies due to over-regulation. The Government began eliminating regulatoryobstacles in order to stimulate growth in the non-oil export sector, which resulted in a steady increase inGDP growth from 1987 to 1997.Economic growth was particularly strong from the early to mid 1990s. However, when the Asian financialcrisis hit the region in 1997, Indonesia’s economy suffered dramatically. In 1998, Indonesia’s GDPcontracted by 13.7% and unemployment rose to 15-20%. The economy began to recover in the late1990s, albeit slower than some other economies in the region. The country has since stabilised its bankingsector and taken steps to stimulate growth and investment, particularly in infrastructure. Indonesia’s GDPhas since grown from 3.8% in 2001 to 5.5% in 2006.Table 1.7.3 GDP growth, 2000-2006GDP growth (%)Country 2000 2001 2002 2003 2004 2005 2006Brunei . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 3.0 2.8 3.8 1.7 3.6 n/aChina................................... 8.0 7.5 8.3 9.5 9.5 9.9 10.7India*................................... 4.4 5.8 3.8 8.5 7.5 8.4 9.2Indonesia ............................... 4.9 3.8 4.4 4.7 5.1 5.6 5.5Malaysia................................. 8.9 0.3 4.4 5.4 7.1 5.3 5.9Philippines............................... 4.4 1.8 4.5 4.5 6.0 5.1 5.4Singapore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.0 (2.3) 4.0 2.9 8.7 6.6 7.9Thailand................................. 4.8 2.2 5.3 7.0 6.2 4.5 5.0Vietnam................................. 6.8 6.9 7.1 7.3 7.8 8.4 8.2Source: Asian Development Bank (ADO 2006) & Jones Lang LaSalle Research*) Data for real GDP is based on constant factor costNote: Thailand GDP for 2006 is preliminary dataAccording to the Economist Intelligence Unit (EIU), real GDP growth in Indonesia is expected to accelerateto 6% in 2007 with interest rates and inflation expected to fall, and measures to improve the businessenvironment and encourage investment beginning to take effect. New policy packages on infrastructureand the financial sector are also expected to facilitate greater private sector investments in the years tocome. The EIU also expects exports to continue to grow, albeit at slower rates than the 12% growth in2006. Weaker forecast economic growth in Indonesia’s main export markets should be partially offset bystrong growth in China and the acceleration in manufacturing exports, particularly textiles and footwear.Stronger investment demand, together with rising private consumption and exports, will lead to higherdemand for imports. As a result, the current account surplus growth will likely fall in 2007 and remain flat in2008.F-12