The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups – has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s.
Today, Indonesia is the world’s fourth most populous nation, the world’s 10th largest economy in terms of purchasing power parity, and a member of the G-20. Furthermore, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to 9.78% in 2020. Prior to the COVID-19 crisis, Indonesia was able to maintain consistent economic growth, recently qualifying the country to reach upper middle income status.
Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term plans, called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional) each with different development priorities. The current medium-term development plan – the last phase of the long-term plan – runs from 2020 to 2024. It aims to further strengthen Indonesia’s economy by improving the country’s human capital and competitiveness in the global market.
Considerable development challenges remain in Indonesia. In addition, the global crisis caused by the COVID-19 pandemic brings unprecedented complications for Indonesia to achieve its development goals.
Between March and September 2020, official statistics reported an increase in the national poverty rate from 9.78% to 10.19%, translating into an increase in the number of poor from 26.42 million to 27.55 million, out of a population of 270.2 million – turning back three years of progress in poverty reduction.
Furthermore, although Indonesia was able to reduce the stunting rate to 27.7% in 2019, more remains to be done. Such efforts are critical to ensure Indonesia’s strong and productive human capital. At the moment, according to the World Bank's Human Capital Index, Indonesia's next generation will only be 54% as productive as it could have been with full health and complete education.
To respond to the shock of the COVID -19 pandemic, the government implemented emergency fiscal packages equivalent to 3.8% of GDP (actual spending) in 2020 and to 4.2% of GDP (tentative; data as of March 18, 2021) in 2021, to deal with the health impact, provide relief to households and firms, and support the vaccine roll-out, and the recovery. The World Bank is supporting the Indonesia’s COVID-19 emergency response, including enhancing social assistance and health care systems, while also strengthening the resilience of the financial sector.
Last Updated: Apr 06, 2021