Economy of Indonesia is set to be the world’s 7th largest by 2030

The Indonesia economy could be among the global top seven by 2030

Already the 16th biggest economy, research by McKinsey about Indonesia’s economic outlook suggests that the Indonesia economy is prepared to become the world’s 7th largest by 2030. Below, we’ll look into the factors that make this possible, such as Indonesia’s robust economic development and expanding population.

Indonesia’s economy is more stable than you might think

Over the past decade or so, the government has prioritised stability over growth when it comes to Indonesia’s economic development; Indonesia’s economic growth has remained stagnant at about 5.5 percent per year on average since 2003.

However, the Indonesia economy’s performance has been consistent. Indonesia has resisted shocks like the global financial crisis of 2008–09 and the end of the China-fuelled commodity boom around late 2011.

The government’s conservative fiscal and monetary policies have kept the national debt relatively low at 29 percent of national GDP. Inflation rates are also still within the central bank’s target range, keeping Indonesia’s economic outlook stable and manageable.

The consuming class is young and rapidly growing

A mostly young and productive population is helping the Indonesia economy thrive. According to the National Development Planning Agency (Bappenas), about 68 percent of the population will be of working age (aged 15 to 44) by 2030. That amounts to about 200 million people – the highest number of productive-aged citizens in a Southeast Asian country.

The growth of the labor force will also help stimulate Indonesia’s economic growth and grow the consuming class. McKinsey’s economic outlook found that around 90 million new consumers will have sprung up by 2030, bringing the consuming class to around 135 million people.

Urbanisation is on the rise

About 32 million Indonesians will have moved from rural to urban areas by 2030. This will raise the proportion of Indonesians living in cities from 53 percent today to 71 percent. In turn, this will help increase the share of Indonesian GDP generated by urban areas from 74 percent today to 86 percent in 2030.

Indonesia’s economic development will also extend to cities besides the capital of Jakarta. Other large cities such as Medan, Bandung, and Surabaya are growing at an average annual rate of 6.4 percent since 2002, outpacing Jakarta’s annual growth of 5.8 percent.

It has a digital-savvy population

Access to affordable devices has made Indonesia a mobile-centric nation with over 220 million mobile subscribers. As of 2016, about 73 percent of Internet users in Indonesia access the Internet via mobile devices. This will make it easier to boost Indonesia’s economic growth and empower the population through tech platforms.

In 2012, Paris-based research firm Semiocast found that Jakarta was the most active city on Twitter, generating over 2 percent of all global tweets. Bandung, another Indonesian major city, was in sixth place after Tokyo, London, São Paulo, and New York.

It’s getting easier to do business in Indonesia

In 2018, Indonesia jumped from the 91st to 72nd place in the World Bank’s Ease of Doing Business Index. The ranking has improved due to government initiatives in improving the registration process and infrastructural affairs like getting electricity.

There’s still some work to be done. – Indonesia slipped back to the 73rd place when the list was updated for 2019 – but this shows that Indonesian regulators are committed to helping businesses establish themselves and help boost Indonesia’s economic growth.

What are the next steps?

Indonesia is a very prospective place to build a business in, but not necessarily a simple one. There are a lot of legal and bureaucratic hurdles you’ll need to face; luckily, you don’t have to do it alone. Our network of consultants are here to help.