Indonesia has been recorded as having the highest unemployment rate among ASEAN countries, according to the International Monetary Fund’s (IMF) World Economic Outlook released in April 2025.
The report places Indonesia’s unemployment rate at 5.0%, slightly ahead of the Philippines (4.5%) and Malaysia (3.2%). In contrast, neighboring countries like Vietnam (2.0%), Thailand (1.0%), and Singapore (2.0%) reported significantly lower rates.
This makes Indonesia the country with the highest jobless rate in Southeast Asia, despite being one of its largest economies.
Structural Issues Behind the Numbers
While Indonesia’s economic growth remains stable at around 5%, this growth has not translated into sufficient job creation. Experts point to several structural challenges:
- Mismatch between education and job market demand, especially among vocational and university graduates.
- Urban-rural disparity, where economic development and formal job opportunities remain concentrated in major cities.
- Dominance of the informal sector, which accounts for over 50% of the workforce, often leaving workers underemployed or without social protection.
According to the IMF's April 2025 World Economic Outlook, the challenge lies not only in unemployment but also in the quality of employment, as a large portion of the workforce remains underemployed or works without stable job security.
How Does Indonesia Compare to Its Neighbors?
Indonesia’s situation becomes more pressing when compared to countries like Vietnam and Thailand, which have managed to keep jobless numbers low despite also being developing economies.
Analysts point out that:
- Vietnam has focused on labor-intensive manufacturing, absorbing a large number of workers, particularly in rural areas.
- Thailand benefits from a stronger SME sector and more effective vocational training.
By contrast, Indonesia’s reliance on sectors with lower labor absorption, like digital startups and capital-intensive infrastructure, means fewer jobs are created per unit of investment.
What Lies Ahead?
The IMF projects Indonesia’s unemployment rate will rise slightly to 5.1% in both 2026 and 2027. Although this is a modest increase, it reflects ongoing challenges in the country’s labor market.
In response, the government has reiterated its commitment to:
- Boosting employment through infrastructure development and industrial downstreaming
- Expanding vocational training programs
- Attracting investment into labor-intensive sectors
However, progress remains gradual. Without significant policy shifts, Indonesia risks missing out on its demographic dividend.
Why This Matters
Unemployment is more than just a statistic—it impacts household income, mental health, and national productivity. For a country with a large youth population, sustained joblessness can lead to long-term social and economic issues.
As other ASEAN countries manage to reduce unemployment despite facing similar global pressures, Indonesia’s figures serve as a wake-up call. Fixing this requires more than just economic growth—it demands inclusive, job-rich development.
