Indonesia: aiming for high income status

The new president, Prabowo Subianto, assumed office on 20 October 2024. He is set to maintain the broad direction of former president Joko Widodo's policies with the intention of transforming the USD1 trillion economy into a high income one by 2045.

Generally, economic growth remains strong. 2024 third quarter GDP growth was 4.9% year-on-year and has been at that rate, or higher, since 2022. Potential growth, helped by demographics and the prospect of favourable productivity developments, is a little under 5% p.a. Growth would have to be maintained at 5% p.a. per capita to get high income status by 2045. That is possible, but certainly ambitious.

Indonesia: a high middle income economy, hoping for high income status by 2045

Inflation is well contained but there is a concern that currency weakness may feed through to higher inflation. That currency weakness has been exacerbated by an anti-graft investigation of the central bank governor’s office.

High levels of perceived corruption remain one of the main weaknesses of the economy. The corruption perceptions score (see the key Stats table) is at 34 out of 100: exactly the same level as 10 years ago. A score below 50 indicates corruption is an impediment to growth.

 On a more positive note, the government’s fiscal position is pretty sound, with a small deficit and low levels of debt relative to GDP. The external positions is also fine, with a low current account deficit, which will be supported by Indonesia’s rich natural resource endowment and its large share of global production.