The Economy of Indonesia in 2023 - Industry & Market Trends

Last Updated: October 30, 2023



271 million


1.32 trillion

GDP Growth Rate

5.3 %

GDP Per Capita

4798 USD

Land Size

1877519 km²


2.3 Child

Unemployment Rate

5.9 %

Inflation Rate

4.2 %

What is The Overall Outlook in Indonesia ?

In the last G20 summit (2022), Indonesia, as the host country, not only demonstrated its full diplomatic skills, but also showed that Indonesia will play a vital role in the coming decades.

Indonesia is not only be the fourth most populous country, it’s also the most powerful economy in Southeast Asia. It is composed of tens of thousands of islands, inhabited by more than 300 ethnic groups, rich in natural resources, and Indonesia, with its steady economic development, has become one of the most attractive countries for foreign investment in recent years.

Compared with the Asian financial crisis, the 32-year dictatorial regime change (Suharto), and Indonesia’s political instability for more than two decades, now Indonesia can be said to be the most prosperous in modern history. era. At that time, after Indonesia’s first democratically elected president Yudhoyono (SBY) took over, during the two terms, a total of ten years in office, Indonesia’s political stability improved significantly.

The current Indonesian Joko Widodo government is intensifying efforts in reforms, from domestic economic reforms, infrastructure investment, reduction of regulations, promotion of privatization of industries, and enhancement of ease of doing business, etc. However, corruption has existed for a long time In Indonesia, this series of reforms still has a lot of rooms for development. Generally speaking, Indonesia is still considered to be full of corruption in many government environments. Not only 90% of Indonesians believe that the government has a huge corruption problem (much higher than the average in Southeast Asia which is at 66%), and many foreign companies feel a lot of differential treatment in the business environment.

Structure of Industry

In recent years, the services sector has acted as the primary driver of economic growth, averaging an annual expansion of 4% from 2017 to 2021, despite a contraction in 2020 due to the pandemic. It accounted for 46.2% of the nominal GDP in 2021 on a factor cost basis. However, the manufacturing sector is set to grow at the fastest pace in the coming five years, with an expected average annual growth of 5.9%. Services will still be substantial, growing at 5.1% on average from 2022 to 2026, while agriculture will grow more slowly at 3.7% during the same time frame. There will be particularly robust growth in telecommunications services, with increased mobile-phone coverage and more affordable tariffs. This will enable a greater number of Indonesians, avid social media users, to communicate electronically.

In the post-pandemic period, the tourism sector is poised to become an influential part of the economy. Gradual recovery is expected in 2022, with the reopening of places like Bali, Bintan, and Batam showing encouraging signs. Despite this, strict entry requirements for foreign tourists might slow the recovery. Nevertheless, a resurgence in Indonesian tourism is anticipated from 2023 onwards when the pandemic is better controlled, and travel restrictions are lifted. Indonesia is also emerging as a hub for luxury tourism and a residence for wealthy “digital nomad” expatriates. Potential growth may be restricted due to transportation infrastructure challenges and intense regional competition, but an increase in visitors from other emerging Asian markets is likely, given Indonesia’s appealing location and tourist sites.

Meanwhile, under-investment has restrained the manufacturing sector’s performance. The government is resolved to escalate investment in manufacturing, aiming to not only enhance the sector but also decrease reliance on imported goods. The ongoing US-China tensions and increasing wages in China may moderately benefit Indonesia’s manufacturing diversification. However, attracting more foreign direct investment (FDI) might be impeded by concerns about the business environment. The authorities are planning to develop a complete supply chain for electric vehicles, capitalizing on Indonesia’s substantial nickel reserves, a vital battery component. Improving the environment for manufacturers will continue to be a government priority as the demand for better-paying formal sector jobs grows.

The government’s initiatives will lead to improvements in the business environment, but the investment system is expected to retain some flaws and nationalistic tendencies. A growing middle class will further stimulate the services sector, which is projected to represent 45.9% of GDP in 2026, a slight decrease from 46.2% in 2021. Although the agricultural sector’s significance will continue to wane, it will remain the country’s largest employer throughout the coming years.

Indonesia - Real GDP Growth
Note: Real GDP Growth (%) | Forecast After 2023 (IMF)

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Economic Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Private Consumption
Gov Expenditure
Capital Formation
Economic Growth(By Type)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Overall Economic Outlook in Indonesia?

Indonesia’s economy has shown resilience in the early part of 2023 following a 5.3% GDP growth in 2022. The country’s exports continue to perform admirably, contrary to the regional trend, and manufacturing PMI has seen an upward movement in March due to increased demand and higher production levels. The robust growth was complemented by a strengthened Indonesian rupiah (IDR), driven by a combination of an improved current account and more dovish expectations from U.S. interest rates after the banking turmoil. This allowed the Bank Indonesia (BI) to hold rates for the third consecutive meeting, even though inflation was around 5%, surpassing the central bank’s target of 2% to 4%.

The short-term outlook for the Indonesian economy seems to be more influenced by global markets rather than domestic fundamentals. While exports have remained strong for now, a sequential decline is expected from the second quarter due to a more noticeable slowdown in the global economy. Indonesia’s exposure to the IT cycle downturn has been less than some Asian counterparts, but it is not immune to the general decrease in external demand. Domestic demand growth is likely to remain relatively stable but subdued, with weaker confidence and reduced exports affecting investment. The impact of monetary tightening will also weigh on the broader economy.

Consumption growth is expected to remain weak. Retail sales increased by 4.8% year-on-year in March but only saw a 0.7% month-on-month rise from a -0.1% in the previous month. Quarterly growth slowed to 0.6% in Q1 from 1.1% in Q4 2022. Despite a recovery in consumer confidence since December, overall growth momentum is seen as modest, with the expectation of 2.8% consumption growth in 2023. The main drivers of consumption are likely to be income growth and a desired savings rate, particularly as poorer segments of society have used their savings and are now likely to rebuild them.

Investment is expected to pick up slowly, with a 0.1% contraction in Q4 2022, and a gradual recovery foreseen. Export growth’s deceleration might result in firms delaying expansion, as evidenced by signs of slowing capital goods imports since last year. Total investment growth for 2023 is expected at 2.6%. The current account is likely to remain in surplus, as it has since 2021. The balance further expanded in 2022 due to higher commodity prices, and a surplus is likely to continue through this year. Though the surplus may narrow towards year-end, a 1.6 percentage point addition to headline growth in real terms is anticipated from net trade.

Inflation: The monetary policy outlook indicates that Bank Indonesia is possibly at the end of its tightening cycle, having maintained its policy rate at 5.75%. The strengthening of the IDR and a decline in inflation to 5% in March from 5.5% in February suggests that the central bank is likely to remain on hold for the rest of the year. In fiscal terms, January-February government revenue data surpassed expectations with a budget surplus of IDR132 trillion. The government deficit is now expected to remain below 3% of GDP this year, in line with the government target, but political sensitivities and upcoming elections in 2024 may pose risks to fiscal consolidation.

Exchange Rate: A gradual weakening of the local currency against the US dollar following an appreciation in January 2023 is likely. The currency is projected to stand at Rp15,372:US$1 at the end of 2023. Looking further ahead, a return to a current-account deficit from 2025 and accelerating inflation will contribute to the depreciation of the rupiah against the US dollar in both nominal and real terms during 2025-27. While occasional heightened volatility may prompt intervention by the central bank, we do not anticipate that the central bank will resist these movements for extended periods.


271 million

Land Size

1877519 km²


1.32 trillion

GDP Per Capita

4798 USD


5.9 %


4.2 %


56 %


2.3 Child

GDP Per Capita
Note: Real Growth (%) | Forecast After 2023 (IMF)
GDP Per Capita (PPP)
Note: Real Growth (%) | Forecast After 2023 (IMF)
Unemployment Rate
Note: %
Inflation Rate
Note: %

Other Economies

Industry Structure

The latest GDP update was in October 2023, updating the data on the contribution of GDP output in various sectors for the year 2022, as a proportion of the total GDP. The data is sourced from the World Bank, IMF, and local government statistics. Predictions on the sources of GDP contribution are from the EIU.

Economic Growth(By Sector)
Note: Real GDP Growth (%) | Forecast After 2023 (EIU)

Demographics Overview

As the most populous country among the member states of the Association of Southeast Asian Nations (ASEAN), Indonesia ranks fourth in the world, after China, India and the United States. According to statistics, the country’s population will reach 270 million in 2021, accounting for about 40% of the total population of ASEAN. After years of demographic changes, Indonesia’s population is relatively young. About half of the total population is under the age of 30, and about 70% of the working-age population, equivalent to more than 140 million people. According to OECD research in 2017 , Indonesia will become the least affected country among ASEAN countries by aging.

Indonesia’s fertility rate has gradually stabilized over the past few decades. The demographic structure at this time is in a very favorable period of demographic transition. The national dependency ratio of the elderly population is only 10%, which is the same as that of India, which also has a young population, but Indonesia’s per capita GDP is nearly twice that of India.

Since 1971, the fertility rate has fallen from 5.4 children per woman to 2.2 in 2020. The share of the population under the age of 15 has fallen sharply (from 44% to 23%), which means that the family planning policy promoted by the government has achieved achieved certain results. In Family Plan 2030 (FP2030), the Indonesian government committed to continue promoting universal access to contraceptive services, securing funding for family planning and reproductive health programs, and increasing private sector contributions to family planning and reproductive health programmes.

According to the estimates of the United Nations Commission on Population and Development, Indonesia’s population will continue to grow at an average annual rate of 0.6% in the next few decades. The workforce is projected to increase from 140.2 million in 2021 to 146.9 million by the end of 2026. As the working-age population continues to grow and become more educated, Indonesia will benefit from a demographic dividend in the short to medium term. This will have a positive impact on living standards across the country as it will push up per capita income and economic growth faster. However, in the short term, such changes may also put pressure on Indonesia’s labor market and social security system.

Declining birth rates and increasing elderly populations will pose challenges to social policy and healthcare infrastructure. Urbanization will also continue to expand, and this expansion will increase the pressure on urban infrastructure, which remains insufficient to meet the needs of the population.

In addition, population distribution and growth rates vary significantly across provinces. The population of the Kalimantan region grew the fastest between 2001-2020 and continues to grow rapidly. The relocation of the national capital to the East Kalimantan province will encourage more immigration into the region. Construction of the new capital will include offices and residences for 1.5 million civil servants, with the first arrivals due in August 2024. And the region where Jakarta is located – the population of Java is still growing, but the growth rate is slower than that of the whole country, and the proportion is declining. 56.1% of the population lived in the region in 2020, compared to 57.4% in 2010.

Population +

1770 k people


4462 k people


2642 k people

Net Migration

-50 k people

Indonesia - Population Growth Drivers
Note: % | forecast after 2023
Indonesia - Age Structure - Historical & Forecast
Note: % | forecast after 2023

Natural Growth

6.6 ‰

Net Migration

-0.2 ‰

Young Dependency

37.8 %

Old Dependency

9.6 %

Indonesia - Median Age
Note: Age
Indonesia - Demographic Structure
Source: UN Population; OOSGA Analytics

Political Overveiw

In 1945, Indonesian Republican forces, under the leadership of Sukarno, the country’s first president, proclaimed independence from the Netherlands. Sukarno’s rule ended in 1967 when General Suharto overthrew him in a coup, following a near-total economic failure. Suharto’s reign, which lasted for three decades, was characterized by authoritarianism until he was compelled to step down in 1998 due to an economic and societal crisis. Subsequently, Indonesia underwent a significant political transformation called the reformasi period, leading to a more democratic governance structure and the implementation of direct presidential elections. In 2014, Joko Widodo, also known as Jokowi, was elected as Indonesia’s seventh president, marking the first time a president was elected from outside the conventional political elite.

Political Structure

In Indonesia, the political structure underwent significant reforms, particularly since the fall of Suharto in 1998. Since 2004, both the president and vice-president are elected directly by the people, a remarkable shift from the previous system. The People’s Consultative Assembly (MPR), which is the country’s legislative body, consists of the 575-member House of People’s Representatives (DPR) and the 136-member Regional Representatives’ Council (DPD). With the implementation of these changes, the role and authority of the DPR were greatly enhanced, marking a departure from the concentrated power that characterized earlier eras of Indonesian governance.

The political reforms also extended to the synchronization of presidential and legislative elections, beginning in 2019. This change aimed to streamline the electoral process and ensure greater alignment between the executive and legislative branches of government. Furthermore, the decentralization of power and the development of local governance structures have played a key role in shaping contemporary Indonesian politics. Overall, these changes have ushered in a more democratic and transparent political system, reflecting Indonesia’s ongoing commitment to political reform and development.

Policy Priorities

As the global prices for commodities, including oil, are expected to stabilize in 2023, Indonesia is likely to experience a continued easing in consumer price inflation. The government will gradually reduce policies that have been primarily aimed at mitigating the impact of inflation. During 2022 and early 2023, these policies, which have been at the forefront of the government’s agenda, included targeted support like welfare aid and subsidies for low-income families.

The Job Creation Perppu will be implemented to reduce labor costs and bureaucratic hurdles for investment, reflecting President Jokowi’s increasing concern about the potential negative global economic outlook in 2023 that might affect growth. Though some question the strength of Indonesian democracy in light of Jokowi’s intervention, it is anticipated that the government will craft legislation to enable most elements of the Job Creation Perppu to take effect by 2023’s end. Infrastructure will continue to be prioritized, but projects may not meet all their targets. This includes the delay of the new national capital’s completion in East Kalimantan until at least 2025 and minimal impact on Jakarta’s congestion. Significant infrastructure focus will remain on Java and Sumatra, including the launch of Indonesia’s first high-speed railway between Jakarta and Bandung in June 2023, which aims to decrease transportation and logistics costs.

During the final year of Jokowi’s term, efforts to attract foreign direct investment will intensify, concentrating on areas like downstream processing, manufacturing, and sustainable infrastructure. These investments are expected to be pivotal for mid-term economic growth, especially in industries related to electric vehicle components. The government’s commitment to combating climate change will continue, with initiatives like the introduction of a carbon trading scheme and a carbon exchange anticipated in the second half of 2023. Subsidies to encourage the purchase of electric vehicles are also expected to become a lasting part of the country’s policy during the forecast period.

Indonesia - Government Spending (% of GDP)
Note: (%)|2023後為預測(IMF)

Current Account Balance

12.67 Billion

Current Account Balance (% of GDP)

1 %

Gov Net Landing/Borrowing(% of GDP)

-2.3 %

Gov Gross Debt(% of GDP)

40.1 %

Indonesia - Current Account Balance
note: (% of GDP) | Forecast After 2023
Indonesia - Gross Debt
note: (% of GDP) | Forecast After 2023

Consumer Brief

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  • Economic Data:OECD, World Bank, IMF、Government Statistics Bureau
  • Currency Exchange:Based on IMF data in 2023/1
  • GDP Growth Projection:OECD、IMF, OECD, EIU、Government Bureau
  • Demographics:UN Population Database
  • Race, Culture, and Languages:CIA Factbook
  • Unemployment Rate Projection:ILO, UNECE
  • Trade:UN Comtrade, UNCTD
  • ICT Infrastructure:ITU
  • Data Calculation & Regression:OOSGA.org
  • Analysis:OOSGA Analytics
Author: Economic Team, CR Team

We track the latest economic developments from spending, retail, real estate to demographics in major economics around the world.

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