Posts

, ,

Indonesia’s Economy Prospers Despite Being Dubbed ‘Fragile’

Indonesia’s economy
Indonesia’s economy was a part of the “fragile five” emerging economies according to U.S. investment bank Morgan Stanley in 2013. Experts considered it to be the most vulnerable to any jumps in U.S. interest rates. However, Indonesia has remained surprisingly stable a decade later as U.S. interest rates have risen rapidly and a global energy, food and climate crisis are happening. With a booming economy and a stable political arena, Indonesia’s currency is currently performing the best in Asia. In addition, the country’s stock market is hitting record highs. As other countries in the region struggle to keep afloat, Indonesia prospers due to unique circumstances.

Indonesia’s Economy in 2022

The southeast Asian country, with a population of around 276 million, is extremely resource-rich. It has undergone impressive economic growth ever since the 1990s Asian financial crisis. According to the World Bank, Indonesia is not just the largest economy in the South-East Asian region but is also the 10th largest economy globally in terms of purchasing power parity. Since 1999, Indonesia has cut poverty rates by more than half to about 10% prior to COVID-19.

The COVID-19 pandemic caused a slight halt in the progress of Indonesia’s economy. For example, poverty rates rose from 9.2% in September 2019 to 9.7% in September 2021. Estimates indicated that the GDP growth of the country was 5.1% in 2022 as Indonesia recovers from COVID-19’s impact. One of the most significant impacts the pandemic had was on children’s learning capabilities. The pandemic resulted in the closing down of schools and could result in the stunting rate of the country increasing.

However, as of September 2022, Indonesia sees unprecedented growth and stability. The country has one of the lowest inflation rates in the world at 4.7% in August 2022, and the country’s GDP has expanded to 5.4%, much more than the amount that was estimated. With exports also increasing to 30.2%, the highest they have been on record, Indonesia’s economy stands in stark contrast to other countries in the region that have struggled with COVID-19’s impact.

Reasons for Indonesia’s Prosperity

One can credit the success of Indonesia’s economy to multiple factors:

  • Political Stability: A large part of Indonesia’s success lies with President Joko Widodo. He has remained popular with the population as well as investors for eight years. A poll that Indikator Politik conducted this month showed his approval rating to be 62.6%, a 10% drop from May 2022, but still significant to show his immense support in the country. With Widodo also hosting the G20 summit in Bali in November 2022, his popularity has kept investors interested in the country’s future.
  • Low Inflation Rates: In comparison to many neighboring countries, Indonesia’s inflation rates have remained consistently low. Combined with interest rates raised for the first time in three years to 3.75%, there have not been major shocks to the system for Indonesians. Although exports are quite high, other factors have also had a significant impact. For example, Widodo’s “omnibus law” aimed at job creation by reducing employment regulations.
  • Indonesia’s Nickel Reserves: With one of the biggest reserves of nickel in the world, Indonesia stands at an advantage, particularly in the electric vehicle industry. The country will likely provide a significant chunk of the nickel supply that the global electric vehicles industry requires going forward. This will also further help the exports of the country.

Concerns for the Future

While Indonesia’s economy has remained stable, there are some concerns for the coming years. While the economy’s stability is not causing concern, the political factors are. Widodo’s lack of a clear candidate combined with the recent drop in his popularity due to cuts in fuel subsidies has raised concerns. Moreover, the country’s main commodity exports like coal are still a huge driving force behind the economy. Additionally, future commodity prices should drop. Many also predict an increase in inflation by October.

Despite such concerns, Indonesia has shown to be invulnerable to shocks like the COVID-19 pandemic and continues to outperform other countries in the region.

– Umaima Munir
Photo: Unsplash

, ,

Key Facts About Poverty in Indonesia

Top 10 Facts About Poverty in Indonesia

The sovereign archipelago of Indonesia is on track to rapid urbanization; in fact, it is the largest country in Southeast Asia, the world’s third most populous democracy and is ranked 16th in GDP. Indonesia also happens to possess the sixth worst inequality of wealth in the world. The nation’s boom in economic viability has been beneficial for some, but Indonesia still persists as a developing country marked by profound wage disparity. The following facts about poverty in Indonesia offer insight on the various forces surrounding the country’s income inequality.

Top 10 Facts About Poverty in Indonesia

  1. The statistics. Indonesia has a population of 261 million; of those, 28 million citizens live below the poverty line, with approximately 10 percent of the population making significantly less than the median income.
  2. Hope in relativity. These statistics may seem indomitable, but poverty in Indonesia has been cut by more than half since 1999. The country has proactively worked on addressing relative poverty — those that generate less than the median income — with the brunt now lying in absolute poverty (those that live below the poverty line). The alleviation of Indonesia’s poorest is more challenging, as they are frequently moored to rural environments that lack proper support.
  3. Rural poverty. Indonesia’s rural communities are typically much poorer than the urban ones, with poverty rates ranging from 13.2 percent to a startling 29.15 percent. Rural poverty focuses on just subsistence, but even this becomes difficult without infrastructure. The people living in these isolated villages often lack access to healthcare, markets and agricultural extension services, and are not equipped with the vocational training needed to succeed in urban communities.
  4. Urban poverty. Poverty reduction efforts can be seen most in urban hubs. In the last year alone, the urban poverty rate improved from 7.72 percent to 7.02 percent. Unequal dispersion of wealth remains starkly apparent in the cities, but momentum continues today with World Bank’s National Slum Upgrading Program (KOTAKU) bettering the lives of more than 9.7 million of Indonesia’s urban poor. KOTAKU accomplishes such a feat by actively improving city infrastructure.
  5. Health access. Nonpartisan groups are currently working to provide mobile clinics and health training to the areas that need it the most. Comprehensive access to healthcare is hopefully on the horizon, as Indonesia launched an ambitious single-payer healthcare program in 2014. The program intends to offer coverage to every Indonesian by 2019.
  6. Lack of education reinforces the poverty cycle. Education in Indonesia has steadily increased in accessibility, but rural districts are typically limited to one public primary school with a rare secondary school. Net enrollment in such areas remains below 60 percent; moreover, the quality of education offered often suffers from politicisation and unqualified teachers, allowing little opportunity for meritocratic mobility.
  7. Children in poverty. Children comprise about 30 percent of Indonesia’s population. As dependents, they are one of the most vulnerable demographics in society. Indonesia has made strides in protecting their basic rights and needs, including cutting the child mortality rate in half and implementing child-focused resources, such as the Family Hope Program.
  8. Food instability. Protectionist food policies leave the country’s poor vulnerable to domestic price hikes. Due to food import quota, licensing and tariff activity, up to 70 percent of an Indonesian household’s income ends up being spent on food alone. In times of duress, such as escalated rice prices in 2015, the poor risk malnutrition while those marginally above the poverty line end up falling below it.
  9. Gender inequality. Women in Indonesia are statistically rated with a lower life expectancy, education and per capita income than Indonesian men. Despite this, women-led enterprises not only contribute 10 percent of Indonesia’s GDP, but they also reduce the volatility of local economic downturns. Gender equity and poverty reduction are critically linked.
  10. Solutions. President Joko Widodo continues to address poverty in Indonesia by channeling welfare aid to targeted households. Affordable Food for the Poor, launched in 2015 by CIPS, focuses on the long-term by publicising policy recommendations on food security. With the development of sustainable infrastructure, better access to a competitive education system and steps towards gender equity, regional and entrepreneurial gaps will fill and bring forth a more prosperous people.

Potential for Growth

These top 10 facts about poverty in Indonesia provide a salient foothold into the country’s current state. Indonesia is projected for great growth and under the right dispersion of assets, national poverty reduction efforts can continue to succeed.

– Yumi Wilson
Photo: Flickr