Indonesia Today

Indonesia is South East Asia largest economy. Between the years 1965 and 1997 the Indonesian economy grew at an average annual rate of almost seven percent. This achievement enabled Indonesia to graduate from the ranks of 'low income countries' into that of the 'lower middle income countries'. However, the Asian Financial Crisis that erupted in the late 1990s caused a severe negative impact on the Indonesian economy, resulting in a decline in gross domestic product (GDP) of 13.6 percent in 1998 and limited growth of 0.3 percent in 1999. Between the years 2000 and 2004 a period of economic recovery took place with a combined average GDP growth of 4.6 percent annually. Hereafter GDP growth increased to an annual average of at least six percent with the exception of 2009 when, amidst the global financial turmoil, Indonesia's GDP growth fell to - a still admirable - 4.6 percent.

Indonesia is increasingly mentioned as an appropriate candidate to be included in the BRIC countries (Brazil, Russia, India and China) as the country is rapidly showing signs of similar newly advanced economic development. Recently, a new set of emerging economies has gained public attention. Members of this set are countries that contain promising markets with diverse economies, reasonably sophisticated financial systems and fast-growing populations. These countries are grouped under the acronym CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), and its combined Gross Domestic Product is predicted to account for half the global economy by 2020.

Prudent financial macroeconomic policy is one reason why Indonesia was resilient to the global financial crisis of 2008-2009. Both public and private debt have fallen sharply (as a percentage of GDP), international reserves have grown fast and inflation has been under control. In combination with relative political stability and certain favorable demographic trends it provides opportunities for strong economic performance over the medium term. Regarding the longer term, the Indonesian government aims to be in the top six of largest global economies by the year 2030.

Another key element that accounts for Indonesia's recent economic growth is domestic consumption. In line with rising per capita GDP and low borrowing costs, Indonesia's private consumption is robust. It accounted for 56 percent of the country's economic activity in 2011 and future projections indicate that it is to grow further.

The table below indicates a remarkable development during the last five decades in the percentage shares of the three main economic sectors (to wit agriculture, industry and services) with regard to Indonesia's Gross Domestic Product (GDP). Indonesia changed from being an economy that was highly dependent on agriculture into a more balanced economy in which the percentage share of manufacturing in the country's GDP quickly exceeded that of the agriculture sector. This also indicates that Indonesia lessened its traditional dependency on primary exports, although it still remains relatively high today. It should also be underlined that all of these sectors underwent rapid expansion, despite the fact that its contribution to Indonesia's GDP fell (agriculture) or remained at a similar level throughout the indicated period (the services sector). For a more detailed account please click on one of the sectors in the table below.