The archipelago has been known for its trade routes and valuable goods from at least the 7 th century AD. Its natural resources, despite former colonialism and recent exploitation, are still vast and rich, which support diverse agriculture.
With a population of over 267 million people, nearly half of whom are under the age of 30 (World Population Review 2020) Indonesia is South East Asia’s largest economy with a GDP of over US$ 1 billion and a growth rate of 5% per year for over a decade. The country has had a growing domestic demand and strong macroeconomic policies, which have further fuelled development. This has included significant investments by the government of Joko Widodo into infrastructure including road, rail, sea and airports, and irrigation, connecting the country more effectively. It has also included initiatives to remove inequality, helping rural regions to build roads, improve water supply and build tourism infrastructure, costing US$ 14 billion over the period from 2015-2018 (Kusuma Hendra, May 2018). A tax amnesty from 2016, became the most successful in history, allowing wealthy Indonesians to declare unreported assets before a government clampdown and resulting in Rupiah 4,865 trillion (ca. US$ 366 billion) reported to the treasury. The aggressive infrastructure spending contributed to an increase in Indonesia’s national debt by 48% between 2014 and 2018, to US$ 181 billion. Despite the increase, the figure is still under the threshold limit imposed by the country’s debt management constitution and the overall debt-to-GDP ratio remains low by global standards at around 30%. Joko Widono was re-elected in 2019 for a second term as president.
Growth has been particularly good for the 45 million middle-class Indonesians who aspire to a modern, international standard of living and who generate nearly 43% of total consumption, according to figures from the World Bank in 2017. PWC in their 2017 report The World in 2050, expected Indonesia to become the world’s 4th largest economy by that date. The COVID-19 pandemic also hit Indonesia hard with tourism falling dramatically and net foreign investment stopping almost completely. However, the government was quick to start economic stimulus, removing temporarily the cap on deficit funding and the economy is again showing growth at the end of 2020, albeit at lower rates than originally expected. (Yusof Ishak Institute 2020).
Source: ASEAN Access