Indicators of Financial System and Macroeconomic Resiliency Indicators  2006  2007  Forecast: 2008  Macroeconomy Macroeconomic condition in 2007 was more resilient than that in 2006, with CPI inflation kept in check, stable rupiah exchange rate, increased foreign reserves, lower debt ratio and maintained fiscal sustainability CPI Inflation Rupiah Exchange Rate  Foreign Reserves  Debt to GDP Short-term debt to foreign reservesratio Primary Balance  6.6% yoy Appreciated by 5.96%, with volatility of 3.79%  6.6% yoy 5% + 1% Appreciated by 0.29%, with volatility of Rupiah exchange rate slightly 1.37% depreciates asa result of rising import in tandem with increasing economic activities Dec‘ 06 = USD42.6 Billi on, equivalent to Dec‘ 07 = USD57 Billion, equivalent to 5.7 USD 72.9 Billion 4.5 monthsof import and government monthsof import andgovernment foreign foreign debt repayment debt repayment 35.3% Oct 2007 = 33% 70.1% 52.4% Surplus: 1.4% of GDP  Surplus: 0.7% of GDP  Banking Industry Banking industry’s resiliency strengthened, demonstrated by increase in capital, improvement in quality of credit, rise in profit a enhancement of risk management Main indicatorsof performance  CAR= 20.47%, NPL Gross= 6.98% (NPL Net = 3.63%), ROA = 2.60%  Credit growth  14,1% with LDRof 64.7%  CAR= 19.82%, NPL Gross= 5.63% (NPL Net = 2.49%), ROA = 2.80% (Oct 2007) 23.1% with LDRof 69.0% (Oct 2007)  NPL Gross : 5.11%  24% with LDR of 72.0%  Capital Market Capital Market’sresiliency improved, asmarket capitalization, volume and frequencyof transaction continued to grow Liquidi ty in Capital Market  Market Capitalization = 45% of GDP Avg.
According to the authors, the Great Inflation did not stem solely from adverse structural changes to the economy, or from policymaker misunderstandings about the nature of the inflation process, or from errors in gauging aggregate resource utilization. Instead, they say, changes in monetary policy preferences, perhaps accentuated by political influences, are the key part of the story.