The Surprising Truth About Indonesia’s GDP Per Capita

As Indonesia steps firmly onto the global economic stage, the question arises: Is Indonesia a rich or poor country?

Money. Unsplash/bady abbas

With a GDP per capita of around $4,942.36 in 2023, this Southeast Asian nation, the largest in the region, presents a complex picture of growth and challenges.

Emerging from the shadows of past economic crises, Indonesia has demonstrated remarkable resilience, positioning itself as the 10th largest economy globally in terms of purchasing power parity. However, the data tells a nuanced story that balances progress against ongoing socioeconomic issues.

Indonesia has indeed made substantial gains since the late 1990s, when it was reeling from the Asian financial crisis. Over the past two decades, the country has halved its poverty rate, bringing it down to under 10 percent by 2019, as reported by the World Bank.

Following the setbacks of the COVID-19 pandemic, the poverty rate saw a slight uptick but has since been projected to return to approximately 9 percent. This recovery underscores a resilient trajectory as the nation continues its push for sustainable growth.

According to the Statistics Indonesia (BPS), Indonesia's economy continued to grow robustly, recording a GDP of IDR 5,536.5 trillion in the second quarter of 2024, with a year-on-year growth rate of 5.05%.

The agricultural sector exhibited particularly strong performance, growing by 23.43% during the same period, while the service sector, especially accommodations and food services, saw growth rates exceeding 10% (BPS, 2024).

But what fuels this economic surge? As Deutsche Bank highlights, Indonesia's strategic location and rich natural resources are pivotal in driving its high GDP.

The country leads the world in nickel production, vital for the booming electric vehicle (EV) market, while also being a significant player in tin and bauxite production.

Furthermore, with a young, dynamic workforce and rising wages, Indonesia is witnessing an expansion in purchasing power and consumer markets, making it an attractive hub for foreign investment and business expansion.

The government's commitment to structural reforms, particularly through the 2020 Omnibus Law, has enhanced the business climate significantly.

This legislation has streamlined bureaucracy and made labor laws more favorable for corporations, facilitating easier market entry and operational efficiency. These reforms are crucial as Indonesia seeks to transition its economy from raw resource extraction to more value-added production, particularly in the burgeoning EV sector.

Despite these advances, Indonesia still grapples with significant challenges. The impact of climate change poses risks to water availability, health, and urban development, particularly in coastal areas. Furthermore, the educational disruptions caused by the pandemic threaten to undermine the potential of future generations.

According to the World Bank, lost learning during school closures could have lasting repercussions for human capital development.

As Indonesia continues to navigate its path toward becoming a major economic power, its GDP per capita will serve as a key indicator of its progress. The nation is on track to join the ranks of the world's top economies by 2030, as projected by Goldman Sachs, but whether it can balance its rapid growth with social equity remains an open question.

As it stands, Indonesia is neither entirely rich nor poor; rather, it is a country in transition, full of potential yet fraught with challenges.