Ranking as the largest in Southeast Asia and the 16th globally, the Indonesian economy boasts an annual gross domestic product (GDP) reaching around USD 940.9 billion in 2016. This underscores Indonesia's significant economic prowess and its noteworthy position on the world stage.
Is the Indonesian economy socialist or capitalist?
Indonesia adheres to the ideology of Pancasila, which originated from Marhaenism, a form of Socialism introduced by Soekarno. Despite these ideological roots, the country predominantly operates on a capitalistic model in practice. Evidence of this shift includes significant wealth disparities and the presence of powerful private companies, exemplified by entities like Freeport, which exert control over key resources.
What is the main economic sector in Indonesia?
In 2022, initial data indicated that the manufacturing sector played a pivotal role in Indonesia's economy, contributing around 18.34 percent to the country's GDP. This marked the sector as the primary contributor to the nation's economic output. Following closely, the second-largest contributor to Indonesia's GDP in 2022 was the wholesale and retail trade sector, succeeded by the agricultural sector.
Indonesia economic resilience against global economy
According to the World Bank's semi-annual Indonesia Economic Prospects report, Indonesia's economic growth continues to demonstrate resilience, accompanied by a declining trend in inflation and a stable currency. The report anticipates a slight easing of GDP growth to an average of 4.9% over the period of 2024-2026. This moderation is attributed to the diminishing momentum in the commodity boom.
Digital economy in Indonesia
Indonesia, with its rapidly expanding digital landscape, is poised to become a key player in the digital economy, especially given its status as the largest digital economy in Southeast Asia. The country has witnessed significant growth, marked by a surge in internet users from 83.7 million in 2013 to 210 million in 2022. With the demographic bonus phenomenon, where half of Indonesia's population from 2030 to 2040 will belong to Generation Y, the potential for a robust digital market is considerable. This demographic shift is crucial for market dynamics, as the productive age group of 15 to 64 years is expected to dominate, holding significant purchasing power.
The digital economy in Indonesia has gained momentum, with around 650 million people in Southeast Asia, and Indonesia, representing 40% of the total population, emerges as a substantial market. Internet penetration in the region is already at 75%, with approximately 60 million new digital consumers emerging after the COVID-19 pandemic.
The digital economy's growth in Indonesia has been accelerated by various factors, including a population of 278 million, a burgeoning middle class, and widespread smartphone usage. The country boasts over 2,000 startups, 2 decacorns, and more than 7 unicorns, particularly flourishing in on-demand services, financial technology, and e-commerce. In 2021, Indonesia's digital economy expanded by 52%, reaching $53 billion, and is projected to exceed $124 billion by the end of 2025.
While the digital economy brings numerous benefits, challenges persist. The Indonesian government, in collaboration with the private sector, can take strategic steps to overcome obstacles. These include addressing the digital talent deficit, providing inclusive digital access, fostering a supportive ecosystem, and improving data regulations to adapt to the evolving digital landscape.
Circular economy in Indonesia
Indonesia is increasingly recognizing the importance of transitioning towards a circular economy to address environmental challenges and promote sustainable development. In recent years, the country has shown a growing commitment to implementing circular economy principles, emphasizing the need to minimize waste and maximize resource efficiency.
Efforts in Indonesia focus on rethinking traditional linear economic models, where products are made, used, and disposed of. The circular economy approach in Indonesia involves promoting the design of products for longevity, encouraging recycling and reuse, and minimizing waste generation. Key sectors, such as manufacturing, agriculture, and waste management, are being targeted to create a more sustainable and resilient economy.
The government, businesses, and civil society in Indonesia are collaborating to develop policies and initiatives that support the circular economy transition. This includes the promotion of eco-friendly practices, the adoption of green technologies, and the establishment of waste management systems that prioritize recycling and resource recovery. As Indonesia continues to embrace the circular economy concept, it is expected to make significant strides in reducing environmental impact and fostering a more sustainable future.
Economy of Indonesia on Reddit
Jack from Jakarta says: "Dear readers, I would like to share my perspective on the current state of Indonesia's economy. The present situation in the country reflects dynamic development. In recent years, Indonesia has actively implemented measures to stimulate economic growth, including investments in infrastructure, the advancement of agriculture, and support for small and medium-sized businesses. Despite the challenges we face, such as changes in global trade and the external economic environment, the nation demonstrates resilience and a commitment to improvement. I am confident that Indonesia has the potential for further prosperity, and I take pride in being part of this exciting economic journey."