Indonesia will not suffer another economic crisis as the one in 1997 and 1998, said the country's prominent economist Faisal Basri quoted by a local newspaper on Thursday.
"Indonesia's economy is stronger now because it has learned a lot from the last crisis," Faisal with Indonesia's Institute for Development of Economics and Finance said on Wednesday.
Indonesia is the country hardest hit by the Asian Financial Crisis in the late-1990's. Its currency against U.S. dollars dropped from about Rp. 2,000 to Rp. 18,000 in two years, when the economy shrunk by 13.7 percent.
According to the economist, Indonesia's short-term loans to foreign reserves ratio was 175 percent in 1997, which stands at 34.5 percent currently. That is to say, the country can safely finance its short-term loans now.
"Our banking sector was erratic in 1997, it is now sturdy. Overall, even in Southeast Asia, judging from indicators such as politics and business, Indonesia is fairly stable," Faisal said.
Thus, he said that the global financial crisis will only affect Indonesia's currency and stock market.
However, he also warned that Indonesia "may eventually feel the impact of the financial crisis as the U.S. economy slows down, resulting in China shifting its export destination from the United States to countries like Indonesia."
In this regard, the economist said that Indonesia should "guard national borders against imports of unessential goods." He added that the government should move its focus from processing trade to domestic potential industries, such as those producing rattan, wood, tea, coffee, cacao and crude palm oil.
Faisal's remarks echoed the statements by President Susilo Bambang Yudhoyono that the country should exploit domestic economy. The President prescribed 10 steps to avoid the negative impact of global financial crisis on Indonesia's economy on Monday at a special cabinet meeting with central bank officials, business leaders, economic observers and mass media figures
But economists said that the government still needs "concrete actions to safeguard the economy, including providing incentives for exporters and raising the deposit insurance limit from Rp. 100million to Rp. 250 million ."