Latest CEBR projection (Late December 2021)
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Indonesia
Indonesia As of 2021, Indonesia is estimated to have a PPP adjusted GDP per capita of $12,967 and is classified as a lower middle-income country, having been downgraded from its upper-middle income status in July 2021 due to the adverse effects of the pandemic, with GDP contracting by 2.1% in 2020.
Nonetheless, the economy has experienced a bounce back in 2021, with an estimated growth rate of 3.2% in 2021. Consequently, output stands 1.1% above 2019 levels. The economy has enjoyed a strong rate of GDP growth since overcoming the Asian financial crisis in the late 1990’s, despite a modest rate of population growth, which averaged just 1.0% per year over the past five years. Indonesia’s economy has been largely propelled by its strong manufacturing and agriculture sectors.
The former contributed towards 19.8% of Indonesia’s 2020 GDP and stands as the tenth largest manufacturing sector in the world, ahead the likes of the UK and Russia. Moreover, it employs approximately a fifth of Indonesia’s active labour force.
The country’s burgeoning manufacturing sector, which consists of mainly textiles & garments, food & beverage, electronics, chemicals, and automotive parts, along with its competent workforce, has attracted much foreign investment, with foreign direct investment in manufacturing in Indonesia amounting to an estimated US$10.4bn in 2018.
The world’s largest island nation also has a robust agriculture sector, with a strong global market share in palm oil especially, producing up to half of the world’s global palm oil supply. Indonesia follows a 20-year development plan, which spans from 2005 to 2025 and is segmented into 5-year medium-term development plans called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional), each with different development priorities. The current medium-term development plan from 2020-25 marks the final phase of this plan and aims to further strengthen Indonesia’s economy by improving the country’s human capital and competitiveness in the global market.
Indonesia has also been lauded for cutting its extreme poverty rate by more than half over the 2000’s, to just under a tenth of the population in 2020. Nonetheless, the pandemic has curtailed progress in poverty reduction, with the poverty rate rising to 10.4% in March 2021, up from the recordlow of 9.2% in September 2019.
Compared to the countries in the world hit most severely by COVID-19, Indonesia has somewhat managed to stifle the effect of the pandemic on its residents, with an estimated 52.1 deaths per 100,000 residents recorded relating to COVID-19 as of December 2021. Indonesia's vaccination campaign has also been relatively successful by global standards, with 53.7% of residents having been administered at least one dose. Moreover, 37.8% are fully protected.
Underpinning the robust GDP growth in 2021 has been a resilient labour market. In 2021, the unemployment rate fell by 0.5 percentage points to 6.6%. While government debt as a share of GDP remains at a moderate level compared to some economies in the region, it did reach 41.4% in 2021, up from 36.6% in 2020, partly due to stimulus policies as part of the pandemic response, which as of November 2020, amounted to IDR744.28 trillion. Between 2021 and 2036, Indonesia is forecast to move from 16th place to 8th place in the World Economic League Table, an 8-place improvement in the rankings.
