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 and 7th largest economy in terms of purchasing power parity. Furthermore, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to under 10 percent in 2019 before the COVID-19 pandemic hit.
The economy grew by almost 8 times in just 2 decades, from $165 Billion in 2000 to one Trillion and 186 billion dollars in 2022, when its economy was measured in Nominal GDP according to the World Bank. In terms of per capita, the average earnings of Indonesia also grew 6 folds from $780 in 2000 to $4,788 in 2022.
Indonesia is now considered an Upper Middle-Income country with GNI per capita reaching $4,576.
Indonesia is a market economy with abundant natural resources, a young, large, and burgeoning population of 277.7 million, and a labor force of 135 million people in 2022. With its political and economic stability, Indonesia is seen as a future economic giant.
A report by one of the globe’s largest professional services firms, PricewaterhouseCooper (PwC), predicts Indonesia will boast the world’s fourth most powerful economy by 2050.
According to the report, Indonesia’s projected rise from its current position as the 7th largest economy in the world to the fourth largest, behind only China, India, and the United States, represents a trend towards emerging economies coming to dominate the 21st century.
While Indonesia’s economy could be the world’s fourth largest by 2050, the gap between the third and fourth largest economies may be significant. The projected third-largest economy, the United States, is expected to be 325% larger than Indonesia’s economy in 2050.
The report assumes Indonesia will have a slower rate of technological progress compared to G7 economies in the short term, but will accelerate its catch-up in the long term as it strengthens its institutional frameworks.
But in order for Indonesia to realize its growth potential, PwC urges the government to implement structural reforms to improve macroeconomic stability, diversify the economy away from undue reliance on natural resources and develop more effective political and legal institutions.
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