DEVOTEES of both "The Simpsons" and The Economist will know that the former once parodied the high seriousness of the latter with a scene in which Homer, thumbing a copy, remarks: “Did you know that Indonesia is at a crossroads?” Homer's question, however, now seems worryingly apposite. In recent years the giant of South-East Asia, with a population of 240m, has been one of the best performers of the world economy, with growth rates consistently spiking above 6%. The only puzzle was why Goldman Sachs hadn’t added it to the BRICs. In the past couple of months, however, the mood has soured dramatically. The economy is stuttering and investors are getting out. On September 12th the central bank revised its growth forecast for this year down from a maximum of 6.2% to a range of 5.5 to 5.9%. So far this year the rupiah has fallen by about 16% against the US dollar and the benchmark stockmarket index is down by over a fifth since its record high in May. Is Indonesia now really at a crossroads?
Indonesia has been caught in a more general sell-off of Asian shares and currencies prompted by fears that America’s Federal Reserve will soon end (or at least “taper”) its policy of ultra-cheap money. But Indonesia, like India, has also been hit particularly hard for reasons that are specific to the country. Tumbling commodity prices, due to slackening demand from China and India, mean that Indonesia’s traditional sources of revenue, from coal, oil, gas and more, are under pressure. Yet the country has not taken advantage of its economic tailwind to tackle its manifold problems—awful infrastructure, rampant corruption and foot-dragging bureaucracy, to name but a few—that impede other sources of growth in the future. Thus Indonesia’s failure to modernise its economy is laid bare.