While in early 2008 the East Asian economies, including Indonesia, were tackling rising inflation caused by the surge in food and fuel prices, after the collapse of the Lehman Brothers in the U.S. on 15 September 2008 they were all confronted by an acceleration in the financial turbulence that had started in mid-2007. The collapse of Lehman Brothers sparked massive sell-offs on stock exchanges and foreign exchange markets (reflecting a flight to safety), including in Indonesia.

Fortunately, Indonesia, like the other middle-income East Asian countries, Malaysia, Thailand, and the Philippines withstood the financial turbulence well because they were better prepared for this shock after the Asian financial crisis of 1997/98. Over the past decade these countries, including Indonesia, strengthened their external balances, increased their foreign exchange reserves, reduced government debt to ensure fiscal sustainability, and improved banking supervision (World Bank, 2009a: 6).

In the fourth quarter of 2008 disruption in the global economy hit Indonesia through the trade channel as export-oriented industries contracted sharply, with adverse impacts on employment. The strong growth of non-oil and gas exports ended abruptly in the fourth (October–December) quarter of 2008, as did imports. The drop in exports, especially of non-oil and gas exports, was most evident in Indonesia's exports to China, which recorded the largest contraction, namely — 22.1 per cent. Exports to Japan, the U.S., the E.U., and the other ASEAN countries also declined (Patunru & Zetha, 2009: 3). Since Indonesia's exports are still dominated by primary commodities, the agricultural sector has also been adversely affected (Patunru & Zetha, 2009: 18).

However, in general Indonesia has thus far only suffered a relatively mild impact from the global financial crisis (GFC). Together with China and India, Indonesia was one of the only three Asian countries recording positive growth. Its economy grew at 4 per cent in the year to June 2009, displaying a more resilient response than some of its neighbours (Resosudarmo & Yusuf, 2009: 287). Although there was a mild decline in economic growth compared to the preceding seven years, this decline was lower than the global average (Hill, 2009: 5) and that of Indonesia's neighbours, including Malaysia, Singapore and Thailand which are much more export-oriented than Indonesia, since Indonesia's exports to GDP ratio is only 17 per cent (Resosudarmo & Yusuf, 2009: 289).