Since the introduction of an inflation target in 2000, the GDP deflator and the CPI have grown at an average annual rate of 103/4 percent and 9%, respectively, which is similar to the pace seen in the two decades preceding the 1997 crisis but well below that seen in the 1960s and 1970s. Throughout the 2000s, inflation has generally trended lower, with some of the variations reflecting government policy measures such as reductions in fiscal subsidies in 2005 and 2008, which resulted in huge transitory spikes in CPI rise.
Due to rising worldwide oil prices and imports, Indonesia experienced a “mini-crisis” in late 2004. Before stabilizing, the currency exchange rate reached Rp 12,000/USD1. The government was compelled to withdraw hefty fuel subsidies under President Susilo Bambang Yudhoyono (SBY), which were set to cost $14 billion in October 2005. Consumer fuel prices more than doubled as a result, resulting in double-digit inflation. The situation had stabilized, but the economy was still struggling, with inflation hovering about 17% in late 2005. As the decade of the 2000s advanced, the economic outlook improved. In 2004, growth climbed to 5.1 percent, then 5.6 percent in 2005. In 19961997, real per capita income surpassed fiscal levels. Domestic consumption, which accounts for nearly three-quarters of Indonesia’s gross domestic product, was the primary driver of growth (GDP). In 2004, the Jakarta Stock Exchange was Asia’s best-performing market, rising 42 percent. Low levels of foreign investment, bureaucratic red tape, and rampant corruption, which costs Rp. 51.4 trillion (US$5.6 billion) yearly, or around 1.4 percent of GDP, continue to stymie growth. However, thanks to the peaceful completion of the 2004 elections, there is a strong economic confidence.
Why is Indonesia’s economy expanding at such a rapid pace?
Following the relaxation of anti-virus mobility restrictions and record-high exports, Indonesia’s economy accelerated in the fourth quarter of last year, mainly to higher commodities prices.
According to figures released by Statistics Indonesia on Monday, Southeast Asia’s largest economy increased 5.02 percent year over year in the October-December quarter, compared to 3.51 percent the previous quarter. According to a Reuters survey, fourth-quarter GDP is predicted to be 4.90 percent.
As the country recovered from the effects of the COVID-19 pandemic, gross domestic output increased 3.69 percent yearly in 2021, compared to a 2.07 percent contraction the year before.
However, mounting COVID-19 cases, anticipated financial market instability due to global monetary tightening, and Indonesia’s own rollback of monetary and fiscal stimulus cloud the outlook for this year.
“People’s mobility was restricted and economic activity slowed in the third quarter since our COVID cases were high,” said Margo Yuwono, head of Statistics Indonesia. “All activities, by the government and the private sector, resumed in the fourth quarter,” she added.
High prices of Indonesia’s primary commodities, such as palm oil, coal, and nickel, drove exports in the October-December quarter, according to Yuwono.
In July-August, Indonesia was beset by a devastating wave of COVID-19 cases, but as infections declined, movement restrictions were removed around the end of August.
COVID-
Due to the spread of the Omicron type, 19 new cases have been reported in Indonesia, with Sunday’s total of 36,057 being the highest since August. The authorities, on the other hand, have not re-imposed strict anti-virus measures.
What factors influence Indonesia’s GDP?
With an annual gross domestic product (GDP) of USD940.9 billion, Indonesia has the largest economy in Southeast Asia and the 16th largest in the world (2016). In 2014, the services industry was Indonesia’s largest employer, employing 45 percent of the country’s workforce (compared to only a third in 1990). The agriculture sector, which employs 34% of local workers (down from 56% in 1990), is followed by the industry sector (which includes manufacturing), which employs 21% of local workers (having become more prominent in recent years).
Indonesia’s economy differs significantly from those of its Asian neighbors Singapore and Thailand. Indonesia’s economy, in instance, is mostly driven by domestic activity rather than exports, which helped it weather the global financial crisis of 2008-09.
Prior to the Asian economic crisis in 1997, Indonesia’s GDP was rated 22nd in the world, at IDR624,337 billion, or to AUD705 per capita yearly income. The economy shrank in 1998, but rebounded in 1999, thanks to higher government and consumer spending. Indonesia has risen through the ranks of the world’s top 20 economies in recent years, gaining it participation in the G20 group of nations.
Indonesia’s economy has advanced in the last ten years, with GDP growth averaging more than 5.7 percent per year, following a substantial setback caused by the Asian economic crisis in the late 1990s. The growth rate in 2016 was slightly lower, at 4.9 percent. This is attributable to a decrease in individual consumption, lower government spending than planned, and low commodity prices. Looking ahead, Indonesia’s yearly average GDP growth is expected to be 5.7 percent from 2017 to 2021, putting it on course to join the club of trillion-dollar nations in a matter of years.
Strong economic growth is assisting the country in achieving significant poverty reductions. Between 1999 and 2014, the percentage of Indonesians living in poverty declined from 23.4 percent to 11.3 percent, according to the World Bank. This was accompanied by a significant increase in the number of Indonesians classified as middle class now reaching 50 million as well as increased investment in basic services, particularly education.
Indonesia has a market-based economy in which the government plays an important role, such as setting prices for basic items like petroleum, rice, and electricity.
In 2015, the industrial sector accounted for 40% of GDP in terms of value added. The industry has been well-positioned for future expansion because to significant foreign direct investment and government incentives. Petroleum and natural gas, textiles and apparel, mining, footwear, plywood, rubber, and chemical fertilizers are all major industrial sectors. The services sector, which accounted for 43% of GDP in 2015, is similarly vital to Indonesia’s economy. Agriculture, on the other hand, accounted for only 14% of the total.
Japan, China, Singapore, and South Korea are Indonesia’s key trading partners. The United States is an important export market as well. Oil and gas, minerals, crude palm oil, electrical appliances, and rubber products are Indonesia’s most important export commodities.
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Is Indonesia’s gross domestic product high?
From 1967 to 2020, Indonesia’s GDP averaged 300.96 USD billion, with a top of 1119.09 USD billion in 2019 and a low of 5.67 USD billion in 1967.
Why is Indonesia’s economy so strong?
Government policies, the country’s natural resource endowment, and its young and rising labor force have all influenced Indonesia’s economic performance. Over the last half-century, Indonesia’s trade openness has expanded in tandem with its economy’s industrialization.
How did Indonesia’s economy improve?
Since emerging from the Asian financial crisis in the late 1990s, Indonesia a diverse archipelago nation with more than 300 ethnic groups has experienced exceptional economic development.
Indonesia is now the world’s fourth most populated country, with the tenth largest economy by purchasing power parity and a G-20 member. Furthermore, Indonesia has made great progress in reducing poverty, with the poverty rate falling from more than half in 1999 to slightly under 10% in 2020.
Indonesia’s economic planning is based on a 20-year development strategy that spans 2005 to 2025. It is divided into RPJMN (Rencana Pembangunan Jangka Menengah Nasional) 5-year medium-term development plans, each with various development priorities. The present medium-term development plan is the final stage of the long-term development strategy. Its goal is to boost Indonesia’s economy through increasing the country’s human capital and global competitiveness.
Indonesia, on the other hand, still has a long way to go in terms of development. Furthermore, the worldwide crisis brought on by the COVID-19 pandemic has posed unprecedented challenges to Indonesia’s development objectives. As a result of the epidemic, Indonesia’s economy fell from upper-middle to lower-middle income category by July 2021. The pandemic also hampered Indonesia’s progress in lowering its poverty rate, which rose from 9.2 percent in September 2019 to 10.4 percent in March 2021, a new low.
In response to an increase in COVID-19 cases from June to July 2021, the government boosted the COVID-19 fiscal package from 4.2 to 4.5 percent of the country’s GDP through budget reallocations from March 2020 to July 2021. The extra funds will be used to improve medical care as well as expand food aid, cash transfers, and wage subsidies.
What accounts for Indonesia’s low GDP per capita?
Second, and this is a fundamental flaw in the Indonesian economy, the country’s export and import performance accounts for only a small percentage of the total GDP. Indonesia’s trade-to-GDP ratio is around 40%, which is significantly lower than the global average of 55-60%. Indonesia is inadequately connected into global supply and value chains, as seen by its low ratio. It’s a condition that means lost opportunities for foreign investment (losing out on new technology and knowledge that foreign investors typically bring), new job prospects, and – more broadly – wasted opportunities for economic and social advancement.
The only ‘benefit’ of a low trade-to-GDP ratio is that the country is less vulnerable to a rapid reduction in international trade, as was the case in 2008-2009 (global financial crisis) and 2018-2020. (in the context of – first – the United States-China tariff war and – second – the COVID-19 crisis). However, this means that when trade conditions are favorable, Indonesia gets left behind (mainly relying on unprocessed commodities).
As a result of Indonesia’s large domestic market (the country has a population of around 270 million people) and relative ‘immunity’ to sudden drops in global trade (as well as drops in foreign investment inflows, as foreign investment as a percentage of GDP is typically low in Indonesia), the country will not experience significant contractions during times of global crises. Singapore, which is heavily reliant on international trade and investment, saw a decline.
What is Indonesia’s economic situation?
Indonesia is a country in Southeast Asia that lies between the Indian and Pacific Oceans. It is an archipelago of 17,508 islands, some of which border Timor-Leste, Malaysia, and Papua New Guinea, and has a vital location astride key maritime routes. The president is the chief of state and the head of government in the republican government system. Indonesia features a mixed economic system, with a mixture of private liberty and centralized economic planning and government regulation. Indonesia is a member of the Association of Southeast Asian Nations (ASEAN) and the Asia-Pacific Economic Cooperation (APEC) (ASEAN).
Is Indonesia a member of the First World?
Since 1990, the phrase “Third World” has been reinterpreted in a number of evolving dictionaries in a variety of languages to refer to countries that are economically and/or socially undeveloped. The word “Third World” may be deemed outmoded from a “political correctness” standpoint, as its notion is largely a historical term that does not adequately address what emerging and less-developed countries signify today. The term “underdeveloped countries” was coined in the early 1960s, and the Third World became its synonym. However, after it was adopted by politicians, ‘underdeveloped countries’ was quickly replaced by ‘developing’ and ‘less-developed countries,’ because the former shows hostility and disrespect, and the latter is often associated with stereotypes. The entire ‘Four Worlds’ classification system has also been criticized because the benchmark was based mostly on each country’s Gross National Product.
The overall definition of the Third World may be traced back to the Cold War era, when nations positioned as neutral and autonomous were referred to as Third World Countries, and these countries are typically distinguished by high poverty rates, a lack of resources, and a precarious financial situation. However, countries that were once deemed Third World countries, such as Brazil, India, and Indonesia, have experienced significant economic growth as a result of fast industrialization and globalization, and are no longer defined by their poor economic status or low GNP. The differences between Third World nations are growing all the time, and it will be difficult to use the Third World to define and organize groups of nations based on their common political arrangements because most countries in this era, such as Mexico, El Salvador, and Singapore, all have their own political systems. Because its political classification and economic structure are too different to be utilized in today’s society, the Third World categorization becomes obsolete. According to Third World standards, any region of the world can be classified into one of four forms of state-society relationships, with four possible outcomes: praetorianism, multi-authority, quasi-democratic democracy, and viable democracy. The rule, on the other hand, will never limit political culture, and the concept of the Third World can be circumscribed.
Is Indonesia more impoverished than India?
India, which is classified as a lower middle income country, is found to score lower than Indonesia on five of the report’s seven criteria. China, on the other hand, is classified as an upper middle income country with higher scores on all seven categories than India.