However, when commodity prices are structurally declining for a prolonged period, then Indonesia's household consumption experiences hiccups. In fact, there is a very strong correlation between swings in commodity prices and trends in Indonesia's household consumption: when commodity prices are high, consumption rises. (1) Growing household consumption (amid rapidly strengthening per capita GDP and purchasing power), which caused household consumption to become the cornerstone of the Indonesian economy and ![]() ![]() This period of recovery and impressive accelerating economic growth between 20 can particularly be attributed to two (inter-related) matters: Hereafter, Indonesia's GDP growth accelerated, with the exception of 2009 when, amid global financial turmoil, uncertainty and massive capital outflows, Indonesia's GDP growth fell to (a still admirable) 4.6 percent. In the aftermath of the Asian Financial Crisis, roughly between the years 20, Indonesia experienced a period of economic recovery with an average GDP growth of 4.6 percent per year. Indonesia, which had just graduated from 'lower-middle income country' to 'upper-middle income country' with gross national income (GNI) per capita at USD $4,050 in 2019, fell back into the category of 'lower-middle income countries' due to four straight quarters of negative economic growth between Q2-2020 and Q1-2021. This one was a truly unprecedented crisis as no-one saw it coming and it affected the entire world, causing the complete collapse of consumption (including tourism), production, investment, and trade. ![]() However, in 2020, another major crisis broke out: the novel coronavirus (COVID-19) crisis. It, in fact, weathered the storm quite comfortably (below we discuss this in more detail). Partly thanks to prudent fiscal policies, Indonesia was not badly affected by the global financial crisis in 2007-2008. The Asian Financial Crisis allowed a re-start for Indonesia by building governance with a focus on prudent fiscal policies and with authorities (such as Bank Indonesia, and later joined by the Financial Services Authority/OJK) that could actually monitor the money flows within the country (including the private sector's foreign debt).
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