Indonesia’s economy withstood the recent global crisis very well, thanks to appropriate stabilisation policies and increased economic and financial resilience. Major social and economic progress has been achieved over the last decade, leading to several upgrades of its sovereign rating toward investment grade. Nevertheless, a number of institutional reforms and policy changes will be needed to deal with several cross-cutting challenges of decentralisation, capacity building at the local level and improved economic governance. Only with such reforms can Indonesia hope to meet its ambitious medium-term targets for growth and poverty reduction and to move to an environmentally sustainable development path.