This paper reviews economic developments in Indonesia during 1996–97. The Indonesian economy continued to perform well in 1996, with real GDP growth of 7.8 percent. The rate of inflation fell to 5 percent in 1996/97, assisted by improved food supplies and generally subdued import prices. A budgetary surplus of 1 percent of GDP was estimated for 1996/97, reflecting higher-than-projected oil revenue and firm expenditure control. However, broad money and private sector credit growth were 27 percent and 24 percent, respectively, in the face of strong private capital inflows.