Indonesia trillion dollar economy in 2015, rajiv biswasDocument Transcript
New analysis on Indonesia becoming a trillion dollar economy by
2015 follows from Rajiv Biswas, Asia-Pacific Chief Economist
for IHS, speaking about the Indonesian Post-Election Economic
Outlook at the IHS Singapore Forum on June 11th. Please feel
free to quote from his analysis.
Rajiv will be at the IHS Singapore Forum and is available for
further interviews and comment. Contact: Rajiv.Biswas@ihs.com |
Indonesian Economy to More than Double over Next Decade;
Country to become Trillion Dollar Economy by 2015
By Rajiv Biswas, Asia-Pacific Chief Economist, IHS
Size of Indonesian economy to more than double in next ten
years to become a USD2 trillion economy by 2022
Indonesia is forecast to become a trillion dollar economy by
2015, becoming the sixth country in APAC to become a USD
trillion dollar economy.
The Indonesian economy has emerged like a phoenix from
the ashes after the East Asian crisis, and has undergone a
remarkable transformation over the last decade under
President Yudhoyono’s two terms of office.
The size of Indonesia’s consumer market will more than
double over the next decade, from USD 500 billion in 2013
to USD 1,300 billion by 2023
Economy forecast to grow at 5.2% in 2014 and 5.5% in 2015
The Indonesian economy was shown a remarkable improvement
in its macroeconomic performance over the last decade under
President Yudhoyono’s two terms of office. The Indonesian
economy has shown sustained strong growth over the last
decade, and has the capacity for sustained long-term economic
growth of around 5.0 to 5.5% per year over the 2015 to 2024 time
horizon. This will transform the Indonesian economy from its
current $880 billion GDP size to a $1 trillion economy by 2015,
with the size of GDP doubling to $2 trillion by 2022.
IHS forecasts that total GDP per person in Indonesia will rise from
around $3,500 in 2014 to around $8,500 by 2024. This has
considerable implications for the size of the Indonesian consumer
economy. The size of Indonesia’s consumer market is forecast to
more than double over the next decade, from USD 500 billion in
2013 to USD 1,300 billion by 2023.
Infrastructure and manufacturing will be new economic
A key priority for the next Indonesian government that takes office
after the upcoming Presidential election should be to accelerate
the development of infrastructure, including power generation,
roads, ports and airports over the next five years through both
increased government capital spending as well as leveraging
public-private partnerships. Indonesia also has the potential for
significant further development as a low-cost manufacturing hub
in East Asia, particularly since wage costs are rising rapidly in
China’s coastal provinces and multinationals are seeking new
low-cost locations for locating their manufacturing plants in lower-
value added segments of manufacturing.
Reflecting Indonesia’s improved macroeconomic performance
and fast-growing domestic demand, foreign direct investment
inflows into Indonesia have more than doubled since the global
financial crisis in 2008-09, rising from around USD 15 billion in
2010 to USD 35 billion in 2013.
Despite the favourable economic performance over the last
decade under President Yudhoyono’s presidency, Indonesia still
needs to tackle major economic development challenges. A key
priority facing the next government will be to further improve the
business climate for investment, with Indonesia currently ranked
120 on the World Bank’s Ease of Doing Business Index,
compared with other ASEAN competitors such as Malaysia which
is ranked 6th, Thailand which is ranked 18th and even Vietnam,
which is ranked 99th.
A key concern for investors in the resources sector relates to the
partial ban imposed by Indonesia earlier this year on unprocessed
mineral exports, which are having negative effects on exports and
fiscal revenues in the near-term. The policies of the next
government regarding mineral exports will therefore be a key
focus for foreign investors.
Indonesia continues to face other economic development
challenges, with poverty and unemployment remaining high. An
estimated 29 million Indonesians still live in poverty, which is
around 12% of the total Indonesian population. Large numbers of
new workers are also entering the workforce each year, with a
total of around 15 million new workers expected to join the labour
force between 2014 and 2020.The next Indonesian government
will therefore face considerable economic challenges in order to
generate sufficient jobs growth to create sufficient new
employment for youth entering the workforce.
The new Indonesian government that takes office after the
Presidential elections will therefore inherit an economy that has
achieved tremendous economic progress over the last decade
under President Yudhoyono, but also faces some tremendous
economic development challenges over their next five-year term
of office. For Indonesia to maintain a strong growth path, a critical
priority for the next government will be to accelerate the pace of
microeconomic reforms, with infrastructure development in power
generation, ports, roads and airports, as well as improving the
business climate for both domestic and foreign manufacturing and
service firms, and avoiding protectionist policies that will hamper
economic growth. If the next government is able to accelerate the
pace of these reforms, it could lift Indonesia’s long-term potential
growth rate to above 6.0% per year.
Asia-Pacific Chief Economist, IHS
Asia Pacific Director
8 Marina View #12-01 | Asia Square Tower 1 | Singapore
Phone: +65 6439 6192 | Mobile: +65 9171 3200
This email message is for the sole use of the intended recipient(s) and may contain confidential and privileged
information. Any unauthorized review, use, disclosure or distribution is prohibited. If you are not the intended recipient,
please contact the sender by reply e-mail and destroy all copies of the original message. Thank you.
Please consider the environment before printing this e-mail.