Assessment and recommendations

Indonesia is Asia’s fifth largest economy, the fourth most populous nation in the world and endowed with abundant natural resources (). Thanks to a series of strong policy reforms and improved governance, significant progress has been achieved in social and educational dimensions since the 1997-98 Asian crisis, and the quality of human capital has been markedly enhanced. Strong macroeconomic performance can be attributed to successful policy management and to the substantial reforms undertaken since the Asian crisis that strengthened the macroeconomic framework and liberalised the international trade regime. Considerable investments in network industries have boosted potential output, and further improvements are expected with the gradual implementation of the Master Plan for the Acceleration and Expansion of Indonesia’s Economic Growth. The economy has also been supported by the dynamism of its small firms, which have accounted for most of the job creation and half of the production growth since 2008 (). Gains in total factor productivity have been increasing over time, a pattern that is observed in many other countries in the region (; Park, 2010).

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