Indonesia’s economy expands as exports, consumption spur growth

Higher commodity prices helped Indonesia's economy to expand in the quarter from April to June. © Reuters

Source The World Bank

Private consumption, which makes up over half of Indonesia’s GDP, rose 5.51% in the second quarter compared to the same period of 2021, while exports increased 19.74%

 

Media www.rajawalisiber.com – The largest economy in Southeast Asia, Indonesia – a diverse archipelago nation of more than 300 ethnic groups – has charted impressive economic growth since overcoming the Asian financial crisis of the late 1990s.

Today, Indonesia is the world’s fourth most populous nation and 10th largest economy in terms of purchasing power parity. Furthermore, Indonesia has made enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to under 10 percent in 2019 before the COVID-19 pandemic hit. Indonesia assumed the G20 Presidency this year, encouraging all countries to work together to achieve a stronger and more sustainable recovery from the pandemic’s impacts.

Indonesia’s economic planning follows a 20-year development plan, spanning from 2005 to 2025. It is segmented into 5-year medium-term development plans called the RPJMN (Rencana Pembangunan Jangka Menengah Nasional), each with different development priorities. The current medium-term development plan is the last phase of the 20-year plan. It aims to further strengthen Indonesia’s economy by improving the country’s human capital and competitiveness in the global market.

With its economy impacted by the pandemic, Indonesia went from upper-middle income to lower-middle income status as of July 2021. The pandemic also partially reversed recent progress in poverty reduction, from the record-low of 9.2 percent in September 2019 to 9.7 percent as of September 2021.

As Indonesia’s economy is now recovering, the country’s GDP growth is projected at 5.1 percent in 2022, supported by growing commodity exports and accommodative fiscal policy to weather the pandemic. Nevertheless, more challenging global conditions and COVID-19 scarring effects could derail the recovery.

Indonesia achieved a notable success in reducing its stunting rate from 37 percent in 2013 to under 24.4 percent in 2021. However, more work remains to be done to ensure strong and productive human capital development.  The World Bank’s Human Capital Index revealed that the loss of learning caused by the closing down of schools during the COVID-19 pandemic will have repercussions for Indonesia’s next generation.

The World Bank is supporting Indonesia’s COVID-19 emergency response, including strengthening elements of emergency response to the pandemic, supporting the government’s free vaccination program, enhancements to social assistance and health care systems, and actions to strengthen the resilience of the financial sector.

In Indonesia, climate change is likely to impact water availability, health and nutrition, disaster risk management, and urban development – particularly in coastal zones, with implications to poverty and inequality.

Indonesia represents the third largest tropical rainforest in the world (94.1 million hectares), and is home to the world’s largest tropical peatlands (14.9 million hectares) and mangrove forests (3.31 million hectares). These natural resources store vast amounts of carbon that mitigate climate change impacts, crucial to sustain the livelihood of Indonesians and support the country’s long-term development.

Indonesia represents the third largest tropical rainforest in the world (94.1 million hectares), and is home to the world’s largest tropical peatlands (14.9 million hectares) and mangrove forests (3.31 million hectares). These natural resources store vast amounts of carbon that mitigate climate change impacts, crucial to sustain the livelihood of Indonesians and support the country’s long-term development.

 

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