Handbook on Trade and Development
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Handbook on Trade and Development

Edited by Oliver Morrissey, Ricardo Lopez and Kishor Sharma

This Handbook comprehensively explores the complex relationships between trade and economic performance in developing countries. Insightful chapters cover issues such as trade, growth and poverty reduction; trade costs, facilitation and preferences; sub-Saharan Africa’s reliance on trade in primary commodities, informal cross-border trade, agglomeration and firm exporting; imported technology, exchange rates and the impact of firm exporting; the increasing importance of China in world trade and links between FDI and trade. This Handbook provides an essential overview of trade issues facing developing countries.
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Chapter 21: Trade, growth and external shocks in Indonesia

Tulus T.H. Tambunan


Indonesia experienced rapid economic growth, at about 6 to 8 per cent per annum, prior to the 1997/98 Asian financial crisis (AFC), which was largely achieved through labour-intensive industrialization and modernization in agriculture. By the mid-1990s, rapid economic growth led to a significant fall in poverty and Indonesia was regarded as a new Asian Tiger along with Malaysia and Thailand. Unfortunately, when the 1997/98 AFC broke out, its economic growth dropped by 13 per cent, largely due to a fall in labour-intensive manufacturing exports, leading to a rise in poverty. However, like other Asian economies, the Indonesian economy recovered quickly from this crisis, but was hit again by the Global Financial Crisis (GFC) in 2008/09. The impact of the GFC, however, was not as severe as the AFC and the country managed well to maintain positive economic growth. Since 2010, Indonesia has been affected by a third crisis from the eurozone region. The chapter examines how external shocks have impacted on Indonesia’s growth performance, with a special focus on trade. It outlines the types of shocks and their impacts on Indonesia, discusses how Indonesia’s foreign trade sector responded to external shocks and the key transmission channels through which they affected its exports and imports.

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