Economic Studies


Population 255,462 million
GDP per capita 3362 US$
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major macro economic indicators

  2014  2015 2016 (e) 2017 (f)
GDP growth (%) 5,0 4,9 5,0 5,1
Inflation (yearly average) (%) 6,4 6,4 3,7 4,2
Budget balance (% GDP)* -2,1 -2,6 -2,5 -2,6
Current account balance (% GDP) -3,1 -2,1 -2,4 -2,5
Public debt (% GDP) 24,7 27,3 27,5 28,2


(e) Estimate (f) Forecast


  • Diversity of natural resources (agriculture, energy, mining)
  • Highly competitive thanks to low labour costs
  • Dynamic tourism industry
  • Lively domestic market
  • Strengthened banking sector 


  • Low investment rate
  • Commodity exports increasingly dependent on Chinese demand
  • Infrastructure shortcomings
  • Persistent corruption and lack of transparency
  • High levels of unemployment and poverty, accentuating inter-ethnic tensions 

Risk assessment

Growth expected to stabilise in 2017

For the first time in four years, activity accelerated in 2016, with growth momentum expected to remain strong in 2017. Household consumption is projected to continue to rise, sustained by the emergence of a middle class with low debt levels, while the central bank is expected to continue its cycle of monetary easing embarked on in 2016 (-275 basis points in 2016). Meanwhile, despite edging up slightly because of modest commodity price increases, inflation is expected to remain contained, which will help support private demand. Private investment is likely to continue to feel the benefits of structural reforms implemented by the Widodo administration. Public spending will remain robust, thanks to infrastructure development and house building for the lowest income households. Furthermore, the construction sector is expected to benefit from the cut in property taxes. Nevertheless, investor confidence is likely to remain constrained by uncertainties over possible changes in the Federal Reserve's monetary policy and further downward pressure on the rupiah. Meanwhile, the country, abundantly endowed with natural resources (oil, coal, natural gas, palm oil, rubber, ores) is expected to continue to be hit by sluggish commodity prices. Weakening demand from China, the second largest recipient of Indonesian exports, will continue to affect the country's external trade.
Finally, activity is expected to remain constrained by the structural weaknesses of the economy, bottlenecks and corruption.


The situation the public finances and the external accounts will remain under control

Despite rising slightly, the public debt will remain moderate in 2017. The removal of energy subsidies in 2015 and 2016, which weighed heavily on the State budget, has enabled expenditure to be reallocated to public infrastructure investment. Despite the cut in corporation tax and lower revenues from hydrocarbons, the public deficit is projected to remain contained through the broadening of the tax base and a partial fiscal amnesty for taxpayers repatriating their offshore funds.
The current account deficit will remain stable in 2017: the trade balance is projected to continue to suffer from the sluggishness of commodity prices and of Chinese demand, while imports are likely to remain firm. Finally, the balance of services will remain in deficit but will benefit from growing tourism revenues.
The Indonesian currency is still dependent on short-term capital flows and could depreciate if there is an increase in global risk aversion, which could enhance the competitiveness of Indonesian exports but could generate additional inflation. Nonetheless, the situation has improved since 2015: the authorities have implemented a more cautious monetary policy, the current account balance has recovered, and the foreign exchange reserves have risen (8 months of imports in 2017). But more reforms are still needed to limit exchange rate vulnerability (liberalisation of investment, specifically relaxation of the rules for foreign investors and lifting of the ban on exports of raw minerals).


Joko Widodo's position growing steadily stronger

The July 2014 presidential elections resulted in the victory of Joko Widodo (Indonesian Democratic Party of Struggle), former governor of Jakarta and the first president not from the army. Although the opposition (led by Prabawo Subianto, losing candidate in the presidential elections) controls 60% of the parliament, the president has managed to strengthen his power since summer 2015 thanks to new alliances and a major ministerial reshuffle. A poll carried out in September 2016 underlines the popularity of the President, who has approval ratings of 66.5%. So, after being hampered by the opposition and dissension within his own party in his attempts to introduce reforms, Widodo's administration has succeeded in initiating some ambitious programmes aimed particularly at reducing red tape. In the space of one year, Indonesia has jumped 15 places on the World Bank's Ease of doing business rankings. However, the country continues to suffer from substantial governance shortcomings.


Last update : Janvier 2017

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