The country is in a favourable situation to undertake necessary reforms Real GDP is projected to grow at around 6% this year and next, led by robust domestic demand. Monetary policy should, as planned, ensure that inflation will remain on a downward trend, using interest rates, liquidity management and macro‑prudential measures. Indonesia’s infrastructure and social spending needs are substantial and will need to be efficiently financed. A substantial reduction in energy subsidies, which fail to achieve their social goals and have significant fiscal costs, would free up resources for pressing social and economic needs. At the same time, well targeted cash‑transfer schemes will be necessary to keep poverty from worsening and thereby help to overcome resistance to energy price increases. Wide communication on the gains and distributional benefits of this reform, together with a rule linking subsidised fuel prices to international oil prices that does not have to be renegotiated every year would ease implementation.