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Global Financial Crisis

The

impact of the Global Financial Crisis on Indonesia

The figure above shows the economic growth rate in selected ASEAN countries, and in this
case Indonesia, Malaysia, Philippines, Thailand and Singapores datas are the ones being
used to see the comparison of economic growth during the global financial crisis in 2008. As
we can see in the first quarter of 2009, there were significant decreases in the rate of
economic growth among these ASEAN countries, except Indonesia whose economic growth
rate remained around 6%. Among these five ASEAN countries, only Indonesia and
Philippines could maintain positive economic growth rate although at declining rates after the
crisis in 2008. It can be seen that Singapore suffered the most because they experienced
the most significant decrease in economic growth in terms or real GDP. The number
declined to -8.9% but this was not a surprise, seeing that Singapore is a country that is fully
integrated wiith the global market for goods, services as well as finance. Singapores
economy is then fully sensitive to any external economic shocks. This is one of the main
reasons why Singapore suffered so much from the global financial crisis.

While the economy of other countries in the group experienced a downturn in 2009
(especially in the first quarters), Indonesia has managed to maintain a positive economic
growth rate, it even increased during the third quarter of 2009. However according to the
data acquired from National Agency of Statistics (BPS), the growth of Indonesian economy
during 2009 was around 4.5% which is much lower than the growth of the previous year.
This indicates that Indonesian economy was also affected by the global financial crisis, but
Indonesia was able to weather the crisis better than most ASEAN as well as the rest of other
countries in the world.

The table shows the economic growth

comparison in the developing world by
region during 2007-2010. As we can see
from the table, besides Indonesia, there
are few other countries like China,
Pakistan, India, and Bangladesh who
could manage to maintain their
economic growth rate and mitigate the
impact of the crisis on their domestic
economy. Also countries in Asia and the
Pacific region performed much better
than those in other parts of the world
during the global financial crisis.

Many explanations can be thought as of

why countries in Asia and the Pacific region weathered the crisis much better than the rest of
the world. The first one is that the variation in the impact of global financial crisis on domestic
economy is strongly related to the degree of integration of the particular country with the
world economy. Take Singapore in the previous figure for example, because they are fully
integrated with the global market, they are highly sensitive to changes in external economic
shocks. Another explanation is rapidness and effectiveness of crisis-coping policy measures
in a particular country also played an important role.
The third indicator of global financial economics impact on Indonesia that we are going to
discuss is the open unemployment rate. As seen from the figure above, during the first
quarter of 2009, specifically in February 2009 the open unemployment rate increases by
0.9% to 9.3%. This shows that global financial crisis affected the amount of unempoyed
people in the labor force in Indonesia back in the beginning of 2009. Though open
unemployment rate increased only slightly,