Macroeconomics is concerned with the economy as a whole economic aggregates and the relationships which exist between them.

It is concerned with measuring the total levels of production, expenditure and income in the economy. Macroeconomics seeks an understanding of the factors which determine these aggregates, and how these cause fluctuations in the level of economic activity from time to time. Macroeconomics is also interested in a range of issues associated with the cyclical nature of economic activity, such as inflation, unemployment and growth. (Parry & Kemp 2000, p. 3) The currency and financial crisis in The Asian country during 1997 spread rapidly to other Asian countries, including Indonesia. To defend its external reserve position, Bank Indonesia (BI), the central bank, abandoned the exchange rate intervention band on 14 August 1997, and adopted a floating exchange rate system. Since then, the exchange and interest rates have been jumping wildly. The external value of the rupiah has depreciated by over 80 percent since July 1997, when it was trading at about Rp2,400 to the dollar (currently it has reached Rp8900 to the dollar). During the same period, the composite stock price index at the Jakarta Stock Exchange (JSX) plunged by more than 60 percent per annum. Meanwhile, liquidity is very tight and depositors pay a stiff penalty for withdrawing time deposits before their maturity date. In his book Nasution (2004) defines the factors causes the crisis: Excessive corporate short term external borrowings, which distorted product and financial market structures, were not invested in ways that would generate the export earnings necessary for repayment. Financial sector reform was not accompanied by strict implementation of rules and regulations. A pervasive lack of confidence in the government, partly caused by the closure of 16 financial distressed Banks in November 1997 and by confusing Government policies, precipitated a bank run, panic buying, and capital flight that led to both internal and external liquidity crunch and a sharp increase in velocity of money. The government decision to limit access to foreign borrowings and to shift public sector deposits from commercial banks to the central bank squeezed liquidity. With banks suddenly illiquid, the risk of default and bankruptcies also increased. BI adopted a floating exchange rate system in mid-August 1997.

suggesting that it had limited external reserves to with which to defend the exchange rate. The exchange rate system has caused not only real appreciation of the exchange rate, but also substantial bet when the intervention band was finally abandoned. As the growing current account deficit could not be financed by running down external reserves, the government had two policy options to narrow or close the deficit: (i) cut domestic absorption or (ii) depreciate the domestic currency. The authorities opted to defend external reserves by moving from the intervention band system to a free float, which raised both interest and exchange rates. As the banks had high bad loan ratios, the rising interest and exchange rate risks caused many bankruptcies and hurt the financial system and economic growth, especially since Indonesian companies followed a high debt/equity financing strategy and heavily relied on external debt. The malfunctioning financial system, worsening economic recession, and surging prices have pushed un employment and underemployment rates up, depressed labour and asset income, and put more people below the poverty line. Because of a lack of access to inflation and devaluation hedges, the income and assets of the poor are most affected by the crisis. The government often tried to tame inflation by controlling wages and prices. More frequent demonstrations, looting and other criminal activities all over the country showed that the economic crisis had become intolerable. Indonesia has no accurate data on unemployment and underemployment. A rough pessimistic estimate put unemployment at about 15 percent in March 1998. In 1996, about 37 percent of the employed were considered underemployed, as they worked less than 35 hours a week. Social problems were unevenly distributed across economic sectors and regions. All urban economic sectors; construction, manufacturing, trade and other services have been hit by the crisis. (Nasution 2004) Economic problem were compounded by political uncertainty generated by the 1997 general elections and the march 1998 presidential election. Angered by rising prices and unemployment, forcing President Suharto who had rule the country since 1966 to resign. But political uncertainty remained, mainly because of his successor, Burhanuddin Jusuf Habibie, was a protg of Suharto, with no strong political base and reputation as a big spender. The removal of President Suharto, however, ended the uncertainty of economic policy, The present administration is committed to implementing the International Monetary Fund (IMF) program. This also followed with the depreciation of dollar, raise the external values of the rupiah from Rp11,550 in mid September 1998 to Rp7,800 one month later. The stronger rupiah helps

reduce inflation and interest rates and rehabilitate the banks and their customer. Since the end of Suharto`s leadership, slowly Indonesia recovering from the economic crisis, although the process is not as smooth as the expectation, but the progress has shown a good sign of improvement. All the economic crisis that in Indonesia all started under Suharto`s leadership. Under the leadership of Susilo Bambang Yudhoyono, Indonesia has slowly shown an improvement in economic, even though the decision that he made didnt have all the support from the Indonesian people. His first controversial policy is to reduce fuel subsides, or in the other words to raise fuel prices. This policy was triggered by rising world oil prices. Budget subsidies are diverted to subsidise education and health sectors, as well as the areas that support the improvement of public welfare. The increase in fuel prices has pushed inflation rate in October 2005 reach 8,7%, which is the peak monthly inflation rate during 2005 and finally closed with a figure 17.1% as of December 30,2005. The biggest contributor to inflation is the increase in transportation costs over 40% and food prices over 18%, Core inflation also raised to 9,4%, Which shows the policy of Bank Indonesia (BI) as the holder of monetary authority to be not fully effective. Reached double digit is far beyond the target of inflation APBNP II in 2005 of 8,6%. Inflation until February 2006 is still very high 17,92%, compared with February 2005 7,15%, which is only 4,6%. Effects of inflation in 2005 was quite influential on the interest rate of Bank Indonesia Certificate (SBI), which became the reference interest rates in the banking world. In August 2005, the SBI interest rate was still higher (9,5%) than the inflation rate (8,3%). Incentives to save in banks are still attractive. But in December 2005, the situation becomes counterproductive because the SBI interest rate (12,75%), far below the inflation rate (17,1%). If this state of chronic, the next interruption would lead to a banking liquidity. However, Indonesia success of keeping the inflation rate of 6,6% and the decrease in SBI interest rate to 9,75 in 2006. Although with the inflation that happened, In mid October 2006, has settled all its remaining debts to the IMF amounted to 3,2 billion U.S. dollars. Also in 2005, 2006, 2007, successive economic growth reached 5,6%, 5,5%, and 6,3%. And the latest growth in 2010 was 6,5% Magnitude draft 2009 budget describes the significant economic growth. Indicators of course the most important tax revenue, for example, the total tax on the 1998/1999 budget of Rp102.4 trillion (end of the Suharto era), or Rp279.2 trillion in the State Budget 2004 (the end of Megawati era), to

Rp583.7 trillion in the draft 2009 budget. With the system and better tax incentives, economic development has got better. Growth in tax revenues average 18,2% per year for five years. Was not able to promote balanced economic growth because the average economic growth rate, only 14% per year in the same period. The allocation of government expenditures in 2009 for greater economic infrastructure such as capital expenditures Rp101,5 trillion, compared to revised budget 2007 of Rp86,2 trillion, is expected to contribute to the achievement of economic targets. If this pattern is followed by budgets in 2009 in Indonesia, Susilo Bambang Yudhoyono government in late 2009 may realize the promises of his campaign: the country is getting stronger and more prosperous people. Another controversial policy under Susilo Bambang Yudhoyono was indirect cash assistance (BLT) for the poor people. Most BLT does not reach the hands of the right to, and the divisions causing many social problems. The policies adopted to increase the income per capita is relying on massive infrastructure development to stimulate economic growth as well as inviting foreign investors with the promise of improving the investment climate. One of them is holding Indonesian infrastructure Summit in November 2006, which bring together investors with local chiefs. On the other hand, talking about unemployment in Indonesia, The Central Bureau of Statistics, official government organisation in charge of processing the various types of data stated the number of unemployed people in Indonesia as 2011 reached 8.32 million people which is equivalent to 7.14 per cent of Indonesia`s population that reached 237.8 million people. The government`s main focus to provide employment for unemployed itself. One of the potential jobs is employees of state agencies. However, the sector could not absorb all the unemployed. The government encouraged the people cultivate the entrepreneurial spirit as one sector employment, being entrepreneurs who create and market products to new business. Entrepreneurs can work in various sectors such as agriculture, services, and technology. The sector that can still be developed for the welfare of the people. The current amount of entrepreneurship in the country just as much as 0.24 percent of the total population, which in fact needed at least 2 percent of entrepreneurs from all over the population to be considered as a developed country. (www.kompas.com). Work opportunity in Indonesia is not as good as a developed country such as Australia, America, or Singapore, its because all the graduated people from University are aiming to get a job in the office or company, while the opportunity that companies offer will not be enough to absorb all the graduated people, people overlooked a job such as construction, electrician, or warehouse job, its because in Indonesia those kind of job do not pay them

a good money, unlike in other country like Australia, those kind of job even can offer them a good amount of money sometime better than the office job. Therefore, all of the graduated people fighting for the same job with the limited demand, while other type of job still left so many spots to fill. The lack of the educational places to teach specialist skills is very few and lack of advertisement, so University is the only place to go for the Indonesian people. Indonesia`s trade balance going to get serious pressure. Although still recorded a surplus, the trend of import growth is greater than the trend growth of exports as the government needs to prepare some anticipatory steps. The macroeconomic and budget realisation Quarter Indonesia`s total exports during February 2011 stood at 14.4 billion U.S. dollars, or grew 27.4 per cent compared with last year. Meanwhile, total imports of Indonesia in February 2011 reached 11.9 billion U.S. dollars, or grew 29.3 percent compared with same period in 2010. Indonesia is still very dependent on imported raw materials, especially auxiliary chemicals for the needs of domestic industries. Data Central Bureau of Statistics show that Indonesia`s imports are specified according to class of use of goods, during the January-March 2011 have increased for all groups, namely for the imports of consumer goods from U.S. $2.17 billion to $3.22 billion, an increase of 48.19%.. Imports of raw materials / auxiliary from U.S. $21.83 billion to U.S. $28.67billion, up 31.32%, while imports of capital goods increased from U.S. $5.94 billion to U.S. $6.88 billion, up 15,87%. Next to import other products, Indonesia is still importing electronics, vehicles, automotive and textile raw materials. Indonesia in terms of oil and gas exports is superior compared with other Asean countries. (www.bisnis.com) CONCLUSION: The economic crisis that happened in the past and reached its climax in Suharto`s leadership are due to the over invested and highly protected nontrade and manufacturing sectors and the weak of financial system. The crisis was aggravated by the Government`s lack of sound macroeconomics management and by the political crisis and social protest against the 32 year long authoritarian regime of President Suharto. Step by step Indonesia has made a huge recovery for the nation. The financial system has shown a significant performance over the past 5 years and the government seems to have a good control, knowledge and experience about macroeconomics management. The economic growth results since 2006 to 2010 has proved it. But, the lack in manufacturing sectors and trading would need serious improvement in order to keep the Indonesia`s economic existence in the world, the natural resources that Indonesia has, has been carelessly looked after by the government and the weak of trading policy has made Indonesia did not able to make the best out of the resources they have. But, the latest

improvement regarding trading policy, including with China, hopefully will get Indonesia back on track and make much more improvement. One more factor that need to be considered is the unemployment sectors, efforts continuously shows from the government to help this issues, but seems Indonesia has not found a good alternatives or policy to solve this issues, the increase of entrepreneurship people in Indonesia recently , could be the sign of the changes, if the government keep encourage and support the people, it is not impossible the number of un employment people will decrease significantly. With the 4 factors strengthen, there is no doubt Indonesia would be one of the country that the whole world cannot look with one eye closed.

Reference lists: Nation, A. 2004, Recent Issues in the Management of Macroeconomic Policies in Indonesia, Gramedia Pustaka Utama, Jakarta Goeltom,M. 2007, THE INDONESIAN EXPERIENCE, Gramedia Pustaka Utama, Jakarta Parry, G. & Kemp, S. 2000, Exploring Macroeconomics, 5th ed, Tactic, NSW. Erlangga Jumena 2011, Presiden Jumlah Pengangguran 8.32 Juta, accesed on 12 May 2011, http://bisniskeuangan.kompas.com/read/2011/02/02/15581695/Preside n.Jumlah.Pengangguran.8.32.Juta Natalina Wasiyati 2011, Indonesia Tergantung Pada Bahan Baku Impor, accessed on 12 May 2011, http://www.bisnis.com/ekonomi/jasa/23132-indonesia-tergantung-padabahan-baku-impor