The essay is talking about the 2008 financial crisis and the impacts on Indonesia. Also it compares the similarities and differences between the 1997 Asian crisis. According to some research and analysis, the two financial crises both have heavy impact on the world economy especially in Indonesia. Also, the two crises have differences. According to the research, Indonesia reacted the crisis better in 2008 because of the good shape of economy and the county's low exposure to the world economy.
The late 2000s financial crisis is the worst by many economists believed, because the 20th century, the Great Depression 30 years of financial crisis. It causes in the United States lack of liquidity in the banking system, leading to Collapse of large financial institutions, governments' bailout of banks and stock markets fell around the world.
In common with other developing countries, Indonesia can not get rid of the global financial crisis. Indonesia affected through three channels: the first one is the stock market, the whole process is very fast, almost immediately, the second one is in the capital markets, including banking shortage and the third one is production. The Asian Financial Crisis of 1997 started in Thailand with the financial collapse of the Thai Baht caused by the decision of the Thai Government to float the baht, cutting its peg to the U.S. Dollar. The initial impact of the 1997 financial crisis is on financial market. The second impact is on the economic activities.
During 2008 global financial crisis, many parts of the housing market also suffered many of the evictions, foreclosures and vacancies were caused by the long-term. It promoted the failure of key enterprises, decline in consumer wealth is estimated that trillions of dollars and significant decline in economic activity, leading to a serious global recession in 2008. U.S. real estate bubble peaked in 2006, causing collapse of the real estate prices plummeted in the United States and it tied to the value of securities and undermines global financial institutions. (The 2008-2009 Financial Crisis - Causes and Effects by Ryan on September 29, 2008)
On bank solvency problems in the credit supply and damaged investor confidence in the global stock markets has, in the securities in 2008, suffered huge losses and impacted early 2009. Slowing down in the global economy during this period causes credit tightening and the decline in international trade. In common with other developing countries, Indonesia can not get rid of the global financial crisis. It affected through three channels: the first one is the stock market, the whole process is very fast, almost immediately, the second is in the capital markets, including banking shortage and the third is production.
For Indonesia, the stock market is relatively small impact on the economy, because most companies rely only on the limited funds in the stock market range. Shortage of funds in the bank, but have a greater impact, because most private firms rely on bank financing. This is reflected in the increase in deposit and lending rates, especially in the interbank loans. The third impact is the production, which is the largest, due to export demand greater than local needs. The shortage may also affect the production of basic needs, mainly due to the shortage of global supply prices. If this occurs, an increase in poverty levels will occur.
Relative to the production of channels in this document, dismissal and redundancy mentioned at the beginning must be considered, because they increase poverty. The shortage may also affect the production of basic needs, mainly due to the shortage of global supply prices. If this occurs, a higher level of poverty is possible. In mid-2008, referring to rumours that the global financial crisis occurs, consult the Government of Indonesia, with estimated economic channels of communication and influence. In the macroeconomic level, policies and the impact of response measures can be developed relatively quickly and control at the micro level, the impact can be painful. 1997 to 1998 of the memory is still in people's minds, despite the current crisis is different.
The crisis will reach the workers and the poor. Workers may be laid off as exports and production decreased. Some people will lose their jobs, but still maintain their standard of living, to use their own savings, or by finding another job. Others are below the poverty line. Any response must be borne in mind that aid targets: businesses and workers, skilled and semi-skilled workers to find better jobs and communities in general, including those living below the poverty line the poor workers.( Aloysius Unditu and Novrida Manurung, ―Bank Indonesia Keeps Rate Unchanged as Inflation Risks Increase,- Bloomberg.com, October 5, 2009,)
Indonesia government reacted on the financial crisis by some policies. The global financial crisis of 2008 - 2009 did not affect Indonesia as acutely as it did in the 1997. The impact was comparatively less because macroeconomic factors were relatively good because the central bank took fast actions at the beginning of the crisis. Also, because the Indonesian government passed an adequate economic stimulus package that favored recovery. Another reason was the importance of the large domestic market, as domestic demand accounts for two-thirds of GDP. Thus, both factors-the good shape of the domestic economy and the county's low exposure to the world economy, which are contributed to the country's resilience in the face of global economic downturn. (Corporate Governance and Stat-Owned-Enterprises: IsitontheRightTrack?MacquarieUniversityLawWorkingPaperNo.2008-30,2008http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1311030 (accessed October 22, 2009).
The Asian Financial Crisis of 1997 boomed in Thailand since the Thai Government cut its peg to the U.S. Dollar. This decision was made because their government was on the verge of bankruptcy. The impact of this faulty decision caused Indonesia to experience High Inflation Rate Devaluation of the Indonesia Rupiah Fall in Foreign Investments High Unemployment rate.( The Economist (Online), ―So far so good. Indonesia's economy and the election,- January 8, 1999) All of this in turn created political as well as economic instability in the country. First, the initial impact of the financial crisis is on financial market. There are two important indicators, which reflect the initial impacts of the financial crisis on Indonesia economies during the1997. One is the change in exchange rates and the other is the change in stock prices. In terms of depreciation of currency against the U.S. dollar, in Indonesia the depreciation was 52.3%.
The second impact is on the economic activities. It includes impact on economic growth, on exports and inflation and unemployment. The impacts of the financial crisis on economic growth can be seen from the figures, In comparison to the 1996 figures, there was a definite decline, Indonesia's growth rate was 8.0%, in 1997, Indonesia growth rate was only 4.7%. Prior to the financial crisis, Indonesia had high growth in terms of exports, in Indonesia, the export growth rate in 1997 were much lower than 1996. It decreased from 10.4% to 8.8%. Two sensitive economic indicators reflected the impact of the financial crisis. The inflation rate and the unemployment rate have risen. The former resulted from depreciation, while the latter was due to the sluggishness of the economies. When economic crisis hit Indonesia in 1997/98, its national economy contracted more badly than other countries as Indonesia experienced a series of crises, such as: currency crisis, liquidity crisis, and banking crisis that was followed by business sector bankruptcy in general. In 1998, Indonesian economy contracted more than 12.8 percent, including to the worst beside East European countries. (Hendri Saparini, Policy Response to Overcome Crisis: A Lesson from Indonesian Case)
As the essay mentioned above, the two financial crises both have heavy impacts on Indonesia economy. They both impact on the production, stock market and capital market of Indonesia. Also the two crises weaken the economic performance and balance of payment. When economic crisis hit Indonesia in 1997/98, its national economy contracted more badly than other countries as Indonesia experienced a series of crises, such as: currency crisis, liquidity crisis, and banking crisis that was followed by business sector bankruptcy in general. In 1998, Indonesian economy contracted more than 12.8 percent, including to the worst beside East European countries. The global financial crisis of 2008 - 2009 did not affect Indonesia as acutely as it did in the 1997. The impact was comparatively less because macroeconomic factors were relatively good because the central bank took fast actions at the beginning of the crisis.
Conclusion
The two financial crises both have heavy impacts on Indonesia economy. The Asian Financial Crisis of 1997 boomed in Thailand since the Thai Government cut its peg to the U.S. Dollar. The 2008 financial crisis causes in the United States lack of liquidity in the banking system, leading to Collapse of large financial institutions, governments' bailout of banks and stock markets fell around the world.They both impact on the capital market, the production and the stock market. The crises break down the growth of economy and make the economy unstable. The global financial crisis of 2008 - 2009 did not affect Indonesia as acutely as it did in the 1997. The impact was comparatively less because macroeconomic factors were relatively good because the central bank took fast actions at the beginning of the crisis. Also, because the Indonesian government passed an adequate economic stimulus package that favored recovery. Another reason was the importance of the large domestic market, as domestic demand accounts for two-thirds of GDP. Thus, both factors-the good shape of the domestic economy and the county's low exposure to the world economy, which are contributed to the country's resilience in the face of global economic downturn.
