Indonesia Economic Outlook
Steady growth:
Indonesia, an archipelago nation straddling Southeast Asia, boasts the fifth largest economy in Asia, with a GDP of over USD 1 trillion and a population of over 270 million. Growth has been robust at around 5% for the last decade, lower than the rates recorded in other major emerging Asian economies such as China, India, Vietnam or the Philippines.
Resource wealth:Indonesia's economy is characterized by its rich natural resources. In particular, Indonesia is a major producer of nickel, palm oil, copper, coal, tin and bauxite. In recent years, the government has clamped down on exports of several key commodities to encourage investment in locally based processing facilities and thus move up the value chain.
Diverse economic make-up:In addition to mining, Indonesia's agricultural sector is also large, accounting for around 12% of GDP in 2023 and a much larger share of the workforce. Indonesia also has a growing industrial base, which, in addition to commodity processing, includes textiles and chemicals. The services sector is a large contributor to Indonesia's economy but is still a notably smaller share of GDP than in developed nations, reflecting Indonesia's status as an emerging economy.
Challenges:The Indonesian economy faces several challenges, including poverty and inequality, poor educational attainment, infrastructure bottlenecks, and corruption, which will likely continue to keep a lid on the economy's economic potential in the coming years. Climate change and extreme weather events are also risks, given that the economy is located in a region that experiences tropical storms and tsunamis.
Indonesia's economic outlook:The economy should expand notably above the Asia ex-Japan average over our forecast horizon to 2028, notwithstanding the aforementioned challenges. Rising tourist arrivals, raw material processing activity, electronics and automobile output will provide support against a backdrop of business-friendly government policy.
Indonesia's Macroeconomic Analysis:
Nominal GDP of USD 1,372 billion in 2023.
Nominal GDP of USD 1,319 billion in 2022.
GDP per capita of USD 4,798 compared to the global average of USD 10,589.
GDP per capita of USD 4,944 compared to the global average of USD 10,589.
Average real GDP growth of 4.3% over the last decade.
Average real GDP growth of 4.4% over the last decade.
Sector Analysis
In 2021, services accounted for 47% of overall GDP, manufacturing 19%, other industrial activity 21%, and agriculture 13%. Looking at GDP by expenditure, private consumption accounted for 56% of GDP in 2021, government consumption 9%, fixed investment 31%, and net exports 4%.International trade
In 2021, manufactured products made up 45% of total merchandise exports, mineral fuels 19%, food 23%, ores and metals 7% and agricultural raw materials 5%, with other categories accounting for 1% of the total. In the same period, manufactured products made up 65% of total merchandise imports, mineral fuels 15%, food 12%, ores and metals 4% and agricultural raw materials 3%, with other goods accounting for 1% of the total. Total exports were worth USD 293 billion in 2022, while total imports were USD 230 billion.Main Economic Indicators
Economic growthIndonesia's GDP growth over the last decade was generally steady and above the emerging-market average, underpinned by strong domestic consumption and a growing middle class. The COVID-19 pandemic caused a significant contraction in 2020. However, the subsequent recovery was swift, driven by government stimulus and a focus on digitalization and infrastructure development. To read more about GDP growth in Indonesia, go to our dedicated page.
Fiscal policy
Indonesia maintained a cautious fiscal approach over the last decade, keeping the deficit generally within 2 to 3% of GDP. Despite challenges such as fluctuating commodity prices and currency volatility, prudent fiscal management prevailed. The COVID-19 pandemic necessitated increased spending, but by 2022, efforts were focused on returning to pre-pandemic fiscal discipline, balancing economic recovery needs with sustainable public finance management. Find out more on our dedicated page.
Unemployment
Indonesia's unemployment rate over the last decade was moderately low at a little over 5%, reflecting the country's steady economic growth and job market expansion. That said, the COVID-19 pandemic caused an increase in unemployment, and by 2023 the unemployment rate was still above its pre-pandemic level. For more information on Indonesia's unemployment click here.
Inflation
Indonesia experienced generally moderate inflation over the last decade. The country's central bank, Bank Indonesia, effectively used monetary policy tools to manage inflation pressures arising from commodity price fluctuations and global economic conditions, including the COVID-19 pandemic. Go to our Indonesia inflation page for extra insight.
Monetary Policy
Indonesia's central bank policy rates over the last decade were adjusted up and down multiple times to manage economic growth and inflation. The bank lowered rates to historic lows during the COVID-19 pandemic to stimulate the economy. Post-pandemic, as the economy recovered, there was a gradual shift towards normalizing rates in 2022 and 2023. See our Indonesia monetary policy page for additional details.
Exchange Rate
Indonesia's rupiah experienced consistent, albeit moderate, depreciation against the US dollar over the last decade. This was likely the result of higher inflation in Indonesia than in the U.S, as well as Indonesia's persistent current account deficits. For more info on the rupiah, click here.
Economic situation in Indonesia
In Q3, annual GDP growth slowed to an over one-year low and undershot market expectations due to calendar effects and weak net exports. In Q4, GDP growth is forecast near Q3’s level. In October–November, inflation fell and consumer confidence remained broadly stable from the prior quarter; both developments should have supported private spending. That said, retail sales growth decelerated from Q3 in October, and manufacturing activity seemingly struggled through November. In other news, in early December, the government announced a USD 1 billion investment offer from Apple, and signed a trade deal with Canada that will bin over 90% of tariffs on Indonesian goods from 2026. In the same month, President Prabowo Subianto confirmed that he would hike a value-added tax on luxury and imported goods from January in a bid to raise funds for his flagship spending programs.Indonesia Economic Forecasts
Projections out to 2034.52 indicators covered including both annual and quarterly frequencies.
Consensus Forecasts based on a panel of 43 expert analysts.
Want to get insight on the economic outlook for Indonesia in the coming years? FocusEconomics collects projections out to 2034 on 52 economic indicators for Indonesia from a panel of 43 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts, and averaged to provide one Consensus Forecast you can rely on for each indicator. This means you avoid the risk of relying on out of date, biased or outlier forecasts. Our Consensus Forecasts can be visualized in whichever way best suits your needs, including via interactive online dashboards , direct data delivery and executive-style reports which combine analysts' projections with timely written analysis from our in-house team of economists on the latest developments in the Indonesia economy. To download a sample report on the Indonesia's economy, click here. To get in touch with our team for more information, fill in the form at the bottom of this page.
Indonesia Economic Indicators
Frequently Asked Question about Indonesia's Economy
What is Indonesia's main economic sector?
What are the major economic issues in Indonesia?
What is the economic condition of Indonesia?
The largest economic sector in Indonesia is the services sector, which accounts for nearly 50% of the country's GDP, followed by industry and agriculture.
Indonesia's economy grapples with challenges like dependence on natural resource exports, infrastructure gaps, regional disparities, and a need for skilled labor. Corruption, complex regulations, environmental issues, and income inequality also impede growth.
Indonesia's economy is growing robustly. Key strengths include abundant natural resources, a large and growing population, strategic location, and government reforms aimed at infrastructure development and improving the ease of doing business. These factors position Indonesia for continued economic growth and regional influence in the coming years.