The Overview of Indonesian Economy

Daftar Sbmptn – Indonesia is a country that has high economic potential; the potential that began to be noticed by the international community. Indonesia has a number of characteristics that place the country in a great position to experience rapid economic development. Furthermore, as of late, there has been solid help from the focal government to check Indonesia’s freedom on crude item sends out while expanding the job of the assembling business in the economy, foundation improvement is likewise the fundamental target of the legislature, and which needs to cause a multiplier impact in the economy.

Previously, Indonesia was often mentioned as the right candidate to be included in the BRIC group of countries (Brazil, Russia, India, and China). Another group that is often mentioned before – which is part of the acronym CIVETS (ie Colombia, Indonesia, Vietnam, Egypt, Turkey, and South Africa) – also received attention because its members have a fairly sophisticated financial system and a fast-growing population. A few years ago the gross domestic product (GDP) of CIVETS was estimated to contribute about half of the global economy in 2020. However, due to the prolonged global economic slowdown after 2011, we rarely hear the terms BRIC and CIVETS again.

Another example that shows worldwide acknowledgment of Indonesia’s solid financial development is the rating update from universal FICO score organizations, for example, Fitch Appraisals, Moody’s and Standard and Poor’s. Solid monetary development, low government obligation, and judicious financial administration were the explanations behind the expansion in valuation. It is also the key to the influx of financial capital in the form of foreign funds to Indonesia: both portfolio flows and foreign direct investment (FDI) have increased significantly. This FDI inflows, which were previously relatively weak for a decade after the Asian Financial Crisis, showing a sharp increase after the global financial crisis in 2008-2009 (but the swift FDI weakened again after 2014 when Indonesia experienced a prolonged economic slowdown between 2011 and 2015).

Although the Indonesian government wants to reduce traditional dependence on exports of raw commodities and increase the role of the manufacturing industry (for example through Law Number 4 of 2009 on Mineral and Coal Mining), it is a difficult road mainly because of the private sector is still hesitant to investBut this transformation is important because the decline in commodity prices after 2011 (which is largely due to weakening Chinese economic growth) has had a drastic impact on Indonesia. Indonesia’s export performance weakened significantly, implying less foreign exchange receipts and reduced public purchasing power, causing an economic slowdown.

The Indonesian government under the authority of Joko Widodo has actualized a few auxiliary changes that focus on long haul monetary development however aim transient torment. For example, most of the fuel subsidies (BBM) have been successfully dismissed, a remarkable achievement (because previously cuts in fuel subsidies have always caused great anger in society) helped by world low crude oil prices. In addition, the government places a high priority on infrastructure development (as evidenced by the government infrastructure budget that has increased sharply) and investment (as evidenced by the deregulation programs released and fiscal incentives offered to investors).

Back to basics: what explains Indonesia’s strong macroeconomic growth?

  • Natural resources/commodities diverse and abundant
  • The population of the younger generation, numerous and growing
  • Political stability (relative)
  • Management of fiscal management wise since the late 1990s
  • The strategic location of the economic giants of China and India
  • Low labor costs
  • Indonesia is a developing market

Indonesia is a market economy in which state-owned companies (BUMN) and large private business groups (conglomerates) play an important role. There are hundreds of diversified private groups doing business in Indonesia (but they constitute a small part of the total number of companies active in Indonesia). Together with the SOEs, they dominate the domestic economy. This also means that wealth is concentrated in the upper part of society (and there is usually a close relationship between the corporate elite and the political elite in the country).

Micro, small and medium enterprises in Indonesia, which together contribute 99 percent of the total number of active companies in Indonesia, are no less important. They contribute about 60 percent of Indonesia’s GDP and create jobs for nearly 108 million Indonesians. This means that micro, small and medium enterprises are the backbone of the Indonesian economy.

There are signs that Indonesia’s economic growth is accelerating again after the economic slowdown in 2011-2015. Thus we may be at the beginning of a period characterized by rapid economic growth. In any case, it should likewise be underlined that Indonesia is a complex nation and contains certain dangers for business ventures or investments. Moreover, the dynamics and context of this country also carry risks.

This Economic section presents an explanation of the current state of the Indonesian economy and discusses a number of important chapters in the history of the Indonesian economy:

3 tanggapan pada “The Overview of Indonesian Economy”

  1. What are the characteristics and factors that contribute to Indonesia’s high economic potential, and how is the government addressing issues related to the country’s reliance on raw material exports, increasing the role of the manufacturing sector, and prioritizing infrastructure development to stimulate economic growth?
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