Before sector was heavily damaged which result in the

Before the Asian Financial Crisis, Indonesia economic seemed
to be growing because of the low inflation in the country, trade surplus,
massive foreign reserves and excellent banking system. According
to Nasution, A. (1998),
“The financial crisis occurs in Indonesia during the unfortunate time on
domestic front, the weather related problem because of El Nino which has
ignited forest fire and long drought last year is likely to continue until this
year.” The agricultural sector was heavily damaged which result in the rise of
food price and declined of the export products. During 1997-1998, their rice
production is estimated to drop from 8-10 percent for their overall income. In the economic sector, when most of the
investors from the outside began to feel uncomfortable with the companies
within Indonesia (the effect of the economic declined from the nearby country)
which made them pulling their money from the country and went to another Asia
countries. The currency was set to float immediately after August 1997 causing
the business with the other foreign loans has to pay more money immediately. Due
this unexpected event which makes the rapid decrease in the rupiah it also
revealed the weakness of the Indonesia monetary sector. It’s also make the
Indonesia economy started to go downward as well. Furthermore, 80% of its value
started to lost and from July 1997 to January 1998, the value declined from
2,400 rupiah to one dollar to 10,000 rupiah per dollar (Jeffrey Hays, 2008). Only
the first week of January, it began to drop 10 percent of its current value
every day and before Suharto’s resignation in May 1998, it reached of 14,000
rupiah to one dollar and later it rose to 16,000 per dollar. A lot of
Indonesian companies (including banks; which some were known about to collapsed)
rushed to purchase dollars, which exacerbated the rupiah (Indonesia-investments,
n.d.). Moreover, some of the banks suffer huge losses while others went
bankrupt (around 16 major commercial banks were closed) due to the unable debts
that they couldn’t pay. Despite to the crisis, the stock market had degraded by
49 percent at the year end of 1997 and in 1998, about 15 percent dropped in the
economic and the number of people with no job increased to 13.2.