Persistent Economic Growth, Indonesia Regains Upper-Middle Income Country Ranking

Persistent Economic Growth, Indonesia Regains Upper-Middle Income Country Ranking

Indonesia has demonstrated its economic strength with impressive growth since overcoming the Asian financial crisis in the late 1990s and the pandemic crisis. The World Bank ranks Indonesia as one of the world's fastest growing economies, with economic growth exceeding 5 percent for six consecutive quarters.

Finance Minister Sri Mulyani Indrawati said that this achievement makes Indonesia one of the world's strongest and most sustained economic growth countries. Although the challenges facing the global economy are varied, many countries are experiencing a significant downturn in 2023 due to global instability. Geopolitical escalation and debt problems in both emerging and developed economies have hampered economic recovery.

However, Indonesia continues to grow strongly amid the global economic slowdown. Domestic economic performance remained stable with manageable inflation and strong purchasing power. Indonesia's inflation reached 4.0% (y/y) in May 2023, a figure that compares favorably with developed countries such as Italy, Australia, Germany and Singapore.

The Indonesian government is committed to keeping inflation at around 3 percent ± 1 percent in 2023 to accelerate the national economic recovery. Policy cooperation and coordination are in place to maintain macroeconomic stability and accelerate the recovery momentum.

Indonesia's achievements can also be seen in the strengthening trade sector. Exports and imports have increased and the trade balance is in surplus. In May 2023, export value reached USD $21.72 billion with a growth of 0.96 percent (yoy), while import value reached USD $21.28 billion with a growth of 14.35 percent (yoy). Thus, Indonesia's trade balance recorded a surplus of USD0.44 billion in May 2023.

In addition, the post-pandemic recovery has elevated Indonesia to the upper middle income group of countries after being a lower middle income country for two consecutive years in 2022. This increase in gross national income (GNI) per capita to $4,580 has strengthened Indonesia's position.

This is in line with Indonesia's ambition to become a high-income country by 2045, which is a key focus of President Joko Widodo's economic agenda. By taking steps such as maintaining economic growth, political stability and reducing poverty rates, Indonesia is moving toward a more prosperous and equitable future.

According to the World Bank, Indonesia continued its strong post-pandemic recovery, with real gross domestic product (GDP) growing by 5.3%. This was the fastest economic growth in nine years.

The largest economy in Southeast Asia, Indonesia first achieved upper-middle income status in 2020, but fell back the following year due to the severe coronavirus outbreak.

However, with a gradual reopening last year, consumption and employment began to recover, while a surge in global commodity prices strengthened the export sector as an additional pillar of growth.

The government is targeting higher GDP growth for 2024, with estimates above 5.7%. The government is also committed to reducing the poverty rate to 6.5%-7.5% from 9.57% in September, with the aim of eradicating extreme poverty completely by next year.

Indonesia's success in maintaining strong economic growth amid global uncertainties is the result of the government's consistent policies and efforts to strengthen the economic fundamentals. To meet future challenges, Indonesia must continue to strengthen cooperation and innovation to build a stronger and more sustainable economy.

Source: Bloomberg | Indonesian Ministry of Finance

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