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Economic and political overview

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). According to official governmental figures, Indonesia's economy, measured by GDP at current market prices, reached IDR 22,139.0 trillion in 2024, with a GDP per capita of IDR 78.6 million (USD 4,960.3). The economy grew by 5.03%, slightly slower than the 5.05% growth in 2023. Economic activity was supported by political campaigns and election spending, along with rising investment, which helped offset shrinking net exports, according to Statistics Indonesia. Investment growth reached 4.61% year-on-year, the highest in six years (data BPS). For 2025 and 2026, the IMF expects growth to remain stable, at around 5.1%; however, the re-escalation of global trade disputes poses a challenge for the future, increasing business uncertainty.

After experiencing a widening of the budget deficit during the pandemic, authorities have intensified fiscal consolidation efforts. Indonesia's unaudited 2024 budget deficit was smaller than expected, at IDR 507.8 trillion (USD 31.38 billion), or 2.29% of GDP, compared to the earlier estimate of 2.7% of GDP. This was wider than 2023's deficit of 1.61%. The government ended 2024 with IDR 45.4 trillion in excess cash, which can help address the 2025 deficit projected at 2.53% of GDP. Revenues rose 2.1% to IDR 2,842.5 trillion, while total spending increased by 7.3% to IDR 3,350.3 trillion. The 2025 expenditure plan is IDR 3,621.3 trillion. A key challenge for 2025 is boosting revenues after the planned VAT increase was scrapped in favour of applying it only to luxury goods. According to the IMF, the country’s debt-to-GDP ratio saw a marginal increase in 2024, reaching 40.5% (from 39.6% one year earlier), but should remain stable over the forecast horizon amid nominal GDP growth. Inflation went down from 3.7% in 2023 to 2.5% last year, within the central bank’s target of 1.5% to 3.5% for 2024 and 2025. While the bank cut rates in September, it has since paused rate changes due to financial market volatility and the rupiah's weakness.

The unemployment rate in Indonesia decreased from 5.3% to 4.9% in 2024, according to World Bank data, though youth unemployment remains high at 17.3%. The labour force participation rate increased to 70.6%, with female participation rising to 56.4%. However, real wages have stagnated, particularly in labour-intensive sectors, and the economy is not generating enough middle-class jobs. Indonesia has achieved enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to approximately 9.4% of the population in 2023. While the average GDP per person (PPP) was estimated at USD 17,520 in 2024 by the IMF, the country has still one of the fastest-rising inequality rates in the East Asia region according to the World Bank.

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 1,371.171,402.591,492.621,614.871,743.58
GDP (Constant Prices, Annual % Change) 5.05.05.15.15.1
GDP per Capita (USD) 4,9204,9815,2485,6236,015
General Government Balance (in % of GDP) -1.6-2.6-2.5-2.5-2.4
General Government Gross Debt (in % of GDP) 39.640.540.740.640.3
Inflation Rate (%) 3.72.52.52.52.5
Unemployment Rate (% of the Labour Force) 5.35.25.15.15.1
Current Account (billions USD) -2.14-14.71-17.85-23.08-24.51
Current Account (in % of GDP) -0.2-1.0-1.2-1.4-1.4

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

Indonesia is a market economy with abundant natural resources, a young, large and burgeoning population (277.5 million), a labour force of 141.3 million people in 2023, and political stability. The country changed from being an economy that was highly dependent on agriculture into a more balanced economy which is lessening its traditional dependency on primary exports. The agricultural sector contributes to 12.5% of the country’s GDP and employs 29% of the active population (World Bank, latest data available). Indonesia is the second-largest natural rubber producer in the world. Other major crops include rice, sugarcane, coffee, tea, tobacco, palm oil, coconuts and spices. Besides, the country is the world's biggest nickel ore producer and has become a major exporter of stainless steel. Indonesian land area used for agriculture has been growing and is currently around 30%. This is mainly due to the establishment of large-scale plantations - in particular for palm oil production (second-largest export). The Central Bureau of Statistics (BPS) reported a significant 30% rise in agricultural, forestry, and fishery exports in 2024, primarily driven by increased coffee exports. As one of the world’s leading coffee producers, Indonesia benefited from growing global demand and higher commodity prices. Indonesia's wheat imports for 2024/25 are expected to drop 8% from 2023/24 when high demand from feed mills and events boosted imports to record levels. Rice imports are set to decline sharply in 2024/25 due to higher domestic production after the national logistics agency intervened in 2023/24 to compensate for a smaller crop. Increased corn production will also reduce imports, though strong demand from feed and wet milling sectors persists (data USDA).

Industry contributed approximately 40.2% of GDP and employed over 22% of the labour force in 2022 (World Bank). The Indonesian industrial sector encompasses a diverse range of industries contributing significantly to the country's economy. Key sectors include manufacturing (19% of GDP), which includes textile and garment production, automotive manufacturing, and electronics assembly, with notable hubs in cities like Jakarta, Surabaya, and Bandung. The mining industry, particularly in coal, palm oil, and natural gas extraction, remains a crucial pillar of Indonesia's industrial landscape, driving export revenues. Moreover, the country is witnessing the emergence of renewable energy as an increasingly important sector, with investments in solar, wind, and hydroelectric power projects aimed at diversifying the energy mix and reducing dependence on fossil fuels. Infrastructure development and construction also play pivotal roles in Indonesia's industrial growth, spurred by ongoing urbanization and investment in transportation networks. Additionally, technology-driven sectors such as information technology (IT) and telecommunications are experiencing rapid expansion, fueled by a growing digital economy and increasing connectivity. Indonesia's manufacturing sector closed in 2024 on a positive note, with PMI rising for the first time since mid-year, along with growth in sales and production capacity by December 2024 (data S&P).

The service sector contributes to 42.9% of the GDP and employs around 49% of the active population (World Bank). Key subsectors include tourism, which capitalizes on Indonesia's rich cultural heritage and natural landscapes, drawing millions of visitors annually (BPS recorded that from January to November 2024, Indonesia welcomed 12.66 million foreign tourists, marking a 20.1% increase y-o-y and the highest figure recorded in the past five years), finance, telecommunications, and retail, which have historically been significant contributors to Indonesia's GDP. With the rise of technology and digitalization, emerging sectors such as e-commerce, fintech, and digital services are gaining momentum, reflecting the country's growing connectivity and innovation landscape. Additionally, Indonesia's vast archipelago and rich cultural heritage foster opportunities in hospitality, entertainment, and creative industries.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 28.8 22.1 49.1
Value Added (in % of GDP) 12.5 40.2 42.9
Value Added (Annual % Change) 1.3 5.0 6.1

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Indonesian Rupiah (IDR) - Average Annual Exchange Rate For 1 USD 13,308.3313,380.8714,236.9414,147.7014,582.20

Source: World Bank - Latest available data.

 

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Foreign Trade

Indonesia is open to foreign trade, which represents around 41% of its GDP (World Bank, latest data available). The country’s main exports include coal; briquettes, ovoids and similar solid fuels (16.0%), palm oil and its fractions, whether or not refined (9.5%), ferroalloys (4.7%), petroleum gas and other gaseous hydrocarbons (3.4%), and copper ores and concentrates (3.2%); whereas imports are led by petroleum oils and oils obtained from bituminous (14.7%), telephone sets, including telephones for cellular (2.8%), petroleum gas and other gaseous hydrocarbons (2.1%), parts and accessories for tractors, motor vehicles (1.7% - data Comtrade for 2023). Exports of manufacturing products from January–December 2023 fell by 9.2%, while exports of agriculture, forestry, and fisheries decreased by 10.0%. Exports from the mining and other sectors dropped by 20.6% compared to the same period in 2022. During the same period, the country’s largest exports came from Jawa Barat, valued at USD 36.63 billion (14.1%), followed by Kalimantan Timur at USD 27.94 billion (10.8%) and Jawa Timur at USD 22.43 billion (8.6% - data BPS).

China remained Indonesia's largest trading partner in 2023, buying up 22.6% of India’s exports, followed by the United States (9.7%), Japan (8.5%), India (8%), and Malaysia (5.3%). In the same year, the main suppliers were China (28.5%), Singapore (8.2%); Japan (7.2%), Malaysia (5.3%), and South Korea (4.9% - data Comtrade). In 2020 Indonesia signed the Regional Comprehensive Economic Partnership (RCEP) with 14 other Indo-Pacific countries. This free trade agreement is the largest trade deal in history, covering 30% of the global economy. It includes the Association of Southeast Asian Nations (ASEAN: Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and ASEAN’s free trade agreement partners (Australia, China, India, Japan, New Zealand and the Republic of Korea). The RCEP covers goods, services, investment, economic and technical cooperation. It also creates new rules for electronic commerce, intellectual property, government procurement, competition, and small and medium-sized enterprises. In February 2025, Indonesian President Prabowo Subianto signed a regulation requiring exporters of resources, excluding oil and gas, to hold all proceeds locally for at least a year. The move is expected to add USD 80 billion to the country's forex reserves.

Indonesia’s trade balance has been positive in recent years. According to WTO data, in 2023, the country exported USD 258.8 billion worth of goods (-11.3% y-o-y), importing USD 221.8 billion (-6.5%). As per services, exports stood at USD 33.4 billion against USD 51.3 billion in imports (+44% and +18.9%, respectively). For the year as a whole, the World Bank estimated the trade balance to be positive by 2.2% of GDP (it was 3.5% one year earlier). According to preliminary figures from Statistics Indonesia, the country’s exports in 2024 amounted to USD 264.7 billion, marking a 2.3% year-on-year increase. The total import value stood at USD 233.6 billion, up by 5.3%.

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 171,276141,622196,190237,447221,886
Exports of Goods (million USD) 167,683163,306231,506291,979258,857
Imports of Services (million USD) 39,28224,77128,55043,16551,353
Exports of Services (million USD) 31,64215,01613,95123,20833,434

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 37.633.040.245.541.3
Trade Balance (million USD) 3,50828,30143,80662,67246,194
Trade Balance (Including Service) (million USD) -4,13318,54629,20842,71528,222
Imports of Goods and Services (Annual % Change) -7.1-17.624.915.0-1.6
Exports of Goods and Services (Annual % Change) -0.5-8.418.016.21.3
Imports of Goods and Services (in % of GDP) 19.015.618.821.019.6
Exports of Goods and Services (in % of GDP) 18.617.321.424.521.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 1.46.010.56.96.9
Volume of imports of goods and services (Annual % change) 8.810.710.07.27.4

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Indonesia is a member of the following international economic organisations: IMF, Asia-Pacific Economic Cooperation (APEC), ICC, Colombo Plan, WTO, Association of Southeast Asian Nations (ASEAN), G-15, G-20, G-77, among others. For the full list of economic and other international organisations in which participates Indonesia click here. International organisation membership of Indonesia is also outlined here.
Free Trade Agreements
Indonesia is a member of Regional Comprehensive Economic Partnership (RCEP) signed on 15 November 2020. The complete and up-to-date list of Free Trade Agreements signed by Indonesia can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2022
China 22.6%
United States 9.7%
Japan 8.5%
India 8.0%
Malaysia 5.3%
See More Countries 45.9%
Main Suppliers
(% of Imports)		 2022
China 28.5%
Singapore 8.2%
Japan 7.2%
Malaysia 5.3%
South Korea 4.9%
See More Countries 45.9%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
President: PRABOWO Subianto Djojohadikusumo (since 20 October 2024)
Vice President: GIBRAN Rakabuming Raka (since 20 October 2024)
Next Election Dates
Presidential: 2029
House of Representatives: April 2029
Current Political Context
On February 14, 2024, Indonesia held general elections to choose the country's president, vice president, and the members of the People's Consultative Assembly. As the constitution placed restrictions, incumbent President Joko Widodo could not run for a third term. Defense Minister and retired Army General Prabowo Subianto, along with Surakarta Mayor Gibran Rakabuming Raka (the eldest son of outgoing leader Widodo), former Jakarta Governor Anies Baswedan, alongside House Deputy Speaker Muhaimin Iskandar, and former Central Java Governor Ganjar Pranowo, alongside Political, Legal, and Security Coordinating Minister Mahfud MD, were the three presidential candidates who ran. Prabowo won a majority of the vote in the first round of the presidential election, negating the need for runoffs. Prabowo's 96.2 million votes were the highest received by any candidate in a democratic election in Indonesia. Nevertheless, Prabowo's Gerindra Party only received 13.2% of the votes in the legislative campaign. Despite losing seats, the Indonesian Democratic Party of Struggle (PDI-P) remained the largest party in the House of Representatives, one of eight parties that qualified for the national legislature in the legislative elections. The United Development Party (PPP) lost national parliamentary representation for the first time in its existence after failing to meet the 4% parliamentary threshold, while Golkar secured the most seats.
In light of the geopolitical rivalry between the United States and China, Indonesia is expected to maintain its non-alignment posture on the outside. Prabowo may have concerns about the West because he was prohibited from entering the country for 20 years before being appointed defence minister in 2019. He may continue to work with Beijing while taking a tough stand on the South China Sea territorial conflicts, though, considering China's substantial economic clout in Indonesia.
Main Political Parties
Single parties have little chance of garnering power alone. Thus, parties often work together to form coalition governments. Primary representation in parliament consists of both nationalist secular parties and moderate and Islamic-oriented groups. The major parties are:
Governing Coalition
- Party of Functional Groups (Golkar): follows conservative liberalism, advocates democratic and liberal values
- Great Indonesia Movement Party (Gerindra): conservatism, nationalism, populism
- National Awakening Party (PKB): Islamist, Pancasila ideology, nationalism
- National Mandate Party (PAN): Islamic democracy, Pancasila ideology
- Democratic Party (PD): centrist, Pancasila ideology

Opposition:
- Indonesian Democratic Party of Struggle (PDI-P): centre-left, follows Pancasila’ideology based on the five founding principles of the Constitution; a split-away group from the PD
- NasDem Party: centre-left, nationalism
- Prosperous Justice Party (PKS): Islamist, conservative.
Executive Power
The President is both the head of the State and the head of the Government. The President enjoys the executive power and appoints the cabinet. Both the President and the Vice-President are elected through direct universal suffrage for five-year terms. The President is the commander-in-chief of the armed forces and responsible for domestic governance and policy-making and foreign affairs.
Legislative Power
The People's Consultative Assembly (MPR), made up of the House of People's Representatives (DPR) and the House of Regional Representatives (DPD), is Indonesia's bicameral legislature. The DPD represents regional interests and has 136 members, with four delegates chosen by each province on a non-party basis. In contrast, the DPR, which is the lower house, has 580 members who are elected directly for five-year terms. Although the DPR can overturn this veto with a majority vote, the President has the power to veto laws but cannot dissolve the parliament.
 

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