March 16, 2011

• Indonesia’s near-term economic momentum is positive
  
  
• Growth was above expectations in Q4 2010 and the World Bank growth forecast for 2011 has been upgraded to 6.4 percent, rising to 6.7 percent in 2012
  
  
• Balance of payments inflows are strong and foreign direct investment has increased, reaching record levels
  
  
• However, rising commodity prices prompt parallels with 2008, bringing both opportunities and challenges for Indonesia
  
  
• As a commodity-producer, Indonesia is well-placed to take advantage of these trends, although the benefits may be uneven
  
  
• Rises in food prices can pose a risk to progress on poverty reduction, even during periods of strong growth
  
  
• Higher oil prices will increase the cost to the budget of Indonesia’s energy subsidies which, for the most part, benefit individuals that are better-off
  
  
• Policies to promote inclusive growth can help to counter the increase in inequality that was seen during the last ten years
  
  
• Looking forward, the emergence of Indonesia’s middle class will result in profound changes as they consume more, demand better jobs and higher quality health and tertiary education services