Not a Trap, But Slow Transition? Indonesia's Pursuit to High Income Status

Abstract

In the last four decades, Indonesia's economy demonstrated remarkable progress. After the devastating currency crises in 1998–99, growth recovered. With the help of commodity prices, Indonesia has become one of the largest middle-income countries in the world. All of this happened amidst the backdrop of delicate political transformations. It is far from clear, however, whether Indonesia can continue to follow the successful path of other industrialized countries in East Asia. We lay out key issues that are likely to hinder Indonesia's transformation to a high-income country and discuss constraints in policymaking that may require calibrating reform prescription with the new political landscape.