The Indonesian economy has experienced considerable structural transformation over the period. Services have overtaken agriculture as the largest source of employment, the range of made-in-Indonesia products has become more sophisticated (in part also due to foreign direct investment), and the recent World Bank reclassification as an upper middle-income country testifies to Indonesia’s rising global status. However, the pace of convergence in income per capita and productivity vis-à-vis the more comparable OECD countries has slowed in recent years (Figure 1.2), notably since the end of the commodities super-cycle in 2014. Moreover, low-value-added services and light manufacturing are still driving employment growth (Lewis, 2019a).

Indonesia has achieved a remarkable growth journey over the past two decades, but its structural frailties have been laid bare by the crisis: widespread informality, insufficient human capital, persisting inequalities, insufficient tax revenues, slow budget execution, cumbersome market regulations and opacity in the allocation of public monies. Measures of financial market stress indicate a significant increase in March as panic spread through global financial markets, followed by rapid normalisation, which occurred as fast in Indonesia as in the rest of Asia and faster than in Latin America (Groen et al., 2020). However, various macroeconomic vulnerabilities have resurfaced in recent months,