Economic Overview
Indonesia is seen as a future economic giant. It is the largest economy in Southeast Asia and the world's seventh by purchasing power parity (IMF). In 2023, the real GDP growth closely approached the approximately 5% average annual rate attained since 2000. By the end of the third quarter, the manufacturing sector sustained its expansion, albeit at a slightly moderated yet robust pace, while the hotel occupancy rate from January to July surpassed pre-pandemic levels. The country is anticipated to sustain rapid and stable growth throughout the projection period. Improved labour market conditions, reduced inflation rates, and enhanced investor sentiment will bolster both consumption and investment, counterbalancing the challenges posed by a subdued global trade environment. Moreover, the tourism sector is expected to witness ongoing recovery, with increasing arrivals and average expenditures contributing positively to economic dynamics. For 2024 and 2025, the OECD forecasts a growth rate of 4.9% and 5.2% of GDP, respectively.
After experiencing a widening of the budget deficit during the pandemic, authorities have intensified fiscal consolidation efforts since 2022. The IMF estimated the government’s budget deficit at 2.2% in 2023; while the 2024 budget aims for a deficit of 2.3% of GDP, with a commitment to maintaining a neutral fiscal stance in the foreseeable future. Public debt has shown a significant improvement since the Asian Financial Crisis in 1998 (it reached up to 150% of GDP), and stood at 39% of GDP as of 2023. The IMF expects the debt ratio to further decrease to 38.2% by 2025, although still above the 2019 level of 30.6%. The impact of Bank Indonesia's previous six-step increase of the policy rate is becoming more evident, as inflation (at 3.6% in 2023) now aligns within the target range (3.0% consumer price inflation with a ±1% corridor). Nevertheless, the Rupiah's depreciation amid rising global uncertainty prompted the central bank to implement another policy rate hike in October. Given current assumptions in commodities markets and barring escalation of global tensions, Bank Indonesia is poised to execute the first rate cut around mid-2024. The IMF expects the inflation rate to hover around 2.5% over the forecast horizon.
The number of unemployed persons has fallen below 8 million and the jobless rate stood at 5.3% in 2023 with a stable outlook for the near future. Indonesia has achieved enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to approximately 9.5% of the population in 2022. While the average GDP per person (PPP) was estimated at USD 15,834 in 2023 by the IMF, the country has still one of the fastest-rising inequality rates in the East Asia region according to World Bank.
| Main Indicators | 2022 | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) |
| GDP (billions USD) | 1,318.81 | 1,417.39 | 1,542.37 | 1,670.63 | 1,805.25 |
| GDP (Constant Prices, Annual % Change) | 5.3 | 5.0 | 5.0 | 5.0 | 5.0 |
| GDP per Capita (USD) | 4,798 | 5,109 | 5,509 | 5,915 | 6,337 |
| General Government Balance (in % of GDP) | -2.1 | -2.2 | -2.2 | -2.1 | -2.1 |
| General Government Gross Debt (in % of GDP) | 40.1 | 39.0 | 38.6 | 38.2 | 37.9 |
| Inflation Rate (%) | n/a | 3.6 | 2.5 | 2.5 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 5.9 | 5.3 | 5.2 | 5.1 | 5.1 |
| Current Account (billions USD) | 12.67 | -3.72 | -9.83 | -17.34 | -21.00 |
| Current Account (in % of GDP) | 1.0 | -0.3 | -0.6 | -1.0 | -1.2 |
Source: IMF – World Economic Outlook Database , October 2021
Country Risk
See the country risk analysis provided by La Coface.
