Indonesia on track to achieving “Top Five” status
The Republic of Indonesia’s Coordinating Ministry for Economic Affairs has released new figures on the performance of the country’s economy.11 Dec. 2019
The figures show that Indonesia is standing its ground amid the current global economic slowdown, with GDP growth holding steady at about 5 percent and poverty, unemployment and income inequality rates continuing to fall. At the same time, the country’s inflation rate remains low and its current account deficit has improved.
Indonesia’s economic strength is due in considerable measure to the purchasing power of its consumers, with private household consumption accounting for a massive 55 percent of GDP growth, effectively making up for the downturn in exports and imports.
Indonesia is benefiting from a favorable investment climate. International rating agencies currently assess the risk of investing in the country as low, and Indonesia’s economy – particularly its digital economy – has moved up in the international competitiveness rankings.
Foreign direct investment in Indonesia increased by 17.8 percent year-on-year in the first nine months 2019. The Doing Business 2020 report ranks Indonesia as 73rd out of 190 countries in terms of ease of doing business, up a long way from 114 in 2015. The Coordinating Ministry for Economic Affairs attributes this improved ranking to regulatory reforms in the following report focus areas: starting a business, getting electricity, and paying taxes.
The country recorded a trade deficit of 1.8 billion US dollars in October 2019, an improvement over the same point in 2018 that is attributable to a reduction in the deficit for oil and gas. Overall, Indonesia’s exports and imports declined by comparison with 2018.
Indonesia’s fiscal policy has three main objectives: to safeguard domestic consumption as the main driver of economic growth; to increase competitiveness so as to remain an attractive destination for foreign direct investment; and to strengthen the export sector. The country’s government also intends to initiate further reforms aimed at improving political and economic stability.
As part of his government’s plans to make Indonesia one of the world’s top five economies by 2045, President Joko Widodo, also known as Jokowi, has defined five priority areas: 1) education and training, 2) infrastructure development, 3) deregulation, 4) reduction of bureaucracy, and 5) economic transformation away from reliance on commodities exports and towards the production and provision of high value-added goods and services.
A key part of this economic strategy is the “Making Indonesia 4.0” roadmap, which is a strong focus of Indonesia’s Partner Country showcase at HANNOVER MESE. The objective of the roadmap is to bring the fourth industrial revolution (Industry 4.0) to Indonesia and push ahead with the expansion of the country’s digital economy. Initiatives to achieve this objective include supporting SMEs in eCommerce, expanding and upgrading the country’s nationwide digital infrastructure, upskilling the workforce through better-quality education and training, and creating a sustainable ecosystem for innovation.
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