Since the taper tantrum episode in mid-2013, the Indonesian authorities have taken significant steps to strengthen the policy framework, including through sound monetary management and a prudent fiscal stance, underpinned by historic fuel subsidy reforms in 2015. This has led to improved economic fundamentals. Nevertheless, Indonesia, like many emerging market economies (EMs) is facing pressures from shifts in the global economy due to slower growth and rebalancing in China, a severe down cycle in commodity prices, and monetary policy normalization in the United States. While the near-term outlook is positive, downside risks and vulnerabilities remain elevated.

Description based on print version record.