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. The country’s GDP per capita has steadily risen, from $823 in the year 2000 to $3,932 in 2018.
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. An emerging lower middle-income country, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to 9.8% in 2018.
Despite heightened global uncertainty, Indonesia’s economic outlook continues to be positive, with domestic demand being the main driver of growth. Supported by robust investment, stable inflation, and a strong job market, Indonesia’s economic growth is forecast to reach 5.2% in 2019.
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 third phase of the long-term plan – runs from 2015 to 2020. It focuses on, among others, infrastructure development and social assistance programs related to education and healthcare. Such shifts in public spending are enabled by reforms of long-standing energy subsidies, allowing for more investments in programs that directly impact the poor and near-poor.
Considerable challenges remain in achieving Indonesia’s goals.
Out of a population of around 264 million, about 25.9 million Indonesians still live below the poverty line. Based on March 2018 data, approximately 20.19% of the entire population remains vulnerable of falling into poverty, as their income hovers marginally above the national poverty line.
While greater efforts are being made to improve basic public services, the quality of health clinics and schools is uneven by middle-income standards, contributing to concerning indicators, particularly in health.
Approximately 1 in 3 children under the age of 5 suffer from stunting, which impairs brain development and will affect their future opportunities.
Last Updated: Sep 25, 2019