Indonesia Study Group

12:30 pm – 2:00 pm
23 January, 2019
Lecture Theatre 2, Hedley Bull Centre, 130 Garran Rd, ANU

Survey of recent developments. Risks, resilience and reforms: Indonesia’s financial system in 2019

Adam Triggs (ANU), Febrio Kacaribu (Universitas Indonesia), Jiao Wang (ANU)

This seminar will preview the authors’ forthcoming article in the Bulletin of Indonesian Economic Studies.

A critical challenge for Indonesia’s economic development is to deepen its financial markets while maintaining financial stability. Authorities have developed a new regulatory framework for preventing and responding to financial and economic crises, including new and reformed institutions. This puts Indonesia ahead of many countries in the region where such frameworks are lacking. But Indonesia’s crisis management framework is not perfect. It has deficiencies which, in the event of a crisis, could see simple liquidity challenges become systemic solvency crises. Regional and global financial safety nets would provide only limited support. A crisis in Indonesia is unlikely. But maturity and currency mismatches in its current account, SOE risks, tightening financial conditions, an appreciating US dollar, an escalating trade war and rising geopolitical tensions in the region may test the resilience of Indonesia’s financial system in 2019. The seminar surveys the recent developments and key risks facing Indonesia. It explores the adequacy of its crisis management framework, how this framework could be improved, the implications of the upcoming election and what reforms need to be undertaken to reduce risks and deepen in the Indonesian financial system.