Country context
As Southeast Asia's largest economy and the fourth most populous country globally, Indonesia has demonstrated remarkable resilience and growth since the Asian financial crisis in 1998. The country has evolved from a lower-middle-income into an emerging upper-middle-income economy, with GDP per capita steadily increasing from USD 823 in 2000 to USD 4,940 in 2023. This growth has been driven by strong domestic consumption, abundant natural resources, and strategic geographical positioning within ASEAN. As a member of the G20 and the world’s seventh-largest economy by purchasing power parity, Indonesia continues to strengthen its regional and global economic influence.
More recently, Indonesia has navigated challenges such as the COVID-19 pandemic and global market disruptions with strategic resilience. The government launched stimulus packages to support businesses and safeguard public welfare, while implementing digital transformation programmes to modernise key sectors. Efforts to bolster the economy have included the Omnibus Law on Job Creation, which simplifies regulations, enhances labour market flexibility, and aims to improve Indonesia’s competitiveness for foreign investment.
Energy transition has also gained traction, with Indonesia committing to reach net-zero emissions by 2060 or earlier. The government has attracted substantial investment into renewable energy, with new solar and geothermal projects expected to help achieve the target of 23% renewable energy by 2025. The OECD also began accession talks with Indonesia in February 2024. These initiatives signal Indonesia's commitment to a more sustainable and diversified economy.
Looking ahead, Indonesia's Golden Vision 2045 aims to raise the country to high-income status by its centenary, with policies focused on innovation, infrastructure and education. However, realising these ambitions will require overcoming persistent challenges, including high poverty rates in rural and remote areas, significant income inequality, structural imbalances in the economic tissue as well as environmental and social pressures resulting from resource dependence and climate change. While recent growth in the digital economy and investment in renewable energy demonstrate the country's forward momentum, the transition to a sustainable economy is complex and will depend on structural reforms, further improving the business climate and overcoming bureaucratic hurdles. Indonesia's young, dynamic workforce represents a unique opportunity, but will require extensive skills upgrading to meet the demands of the Fourth Industrial Revolution.
