Indonesia's Economy
The 1997-98 Crisis and Suharto's Fall
How the Asian financial crisis hit Indonesia hardest, causing the rupiah to collapse, the economy to shrink by 13 percent and Suharto to resign.
The 1997 Asian financial crisis hit Indonesia harder than any other country.
The collapse
- The rupiah lost around 80 percent of its value.
- Companies with dollar debts couldn’t repay.
- Many banks failed.
- The economy shrank by about 13 percent in 1998.
Social impact
- Poverty jumped.
- Food prices soared.
- Riots in Jakarta in May 1998.
IMF programme
The IMF’s programme, including bank closures and austerity, was criticised for worsening panic.
Suharto resigns
Suharto resigned in May 1998 after 32 years.
Reformasi
The crisis led to Reformasi: democracy, press freedom and decentralisation.
Lessons
- Short-term foreign debt and weak banks create vulnerability.
- Economic crises can topple long-lasting regimes.
The dollar loan
A Jakarta company borrowed dollars when a dollar cost 2,500 rupiah. After the crash, a dollar cost over 10,000 rupiah, making its debt four times heavier.
Thinking the crisis hit all Asian countries equally
Indonesia suffered the deepest collapse.
Key takeaways
- The rupiah lost about 80 percent of its value.
- Indonesia's economy shrank about 13 percent in 1998.
- Suharto resigned in May 1998.
- Reformasi brought democracy and decentralisation.
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