| Summary: | This Indonesia Economic Quarterly (IEG) quarterly report covers the economic growth of Indonesia as in June 2016. With the global recovery yet to be realized, Indonesia's resilience stands out among commodity exporters. A number of good policies have contributed to Indonesia's resilience. First, prudent monetary and exchange rate policies, along with international financial conditions that are more favorable than a year ago, have helped reduce inflation and stabilize the Rupiah. These factors, as well as lower energy prices, have supported aggregate household consumption. Second, public infrastructure spending has become a priority within Indonesia's limited fiscal space. Gross domestic product (GDP) growth in first quarter (Q1) 2016 was 4.9 percent year-on-year (yoy), with public spending lower than expected. The current account deficit narrowed to 2.1 percent of GDP, as imports fell faster than exports. Fiscal policy in Indonesia has not been very effective in reducing inequality, but the fuel subsidy reform has helped. The 2015 fuel subsidy reform, and related compensation for the poor, has helped reduce inequality, as savings were redirected into infrastructure, health, and social assistance
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