Economy

Following a decade of growth at an average rate of 6% per year, Indonesia’s economy faced external and internal challenges in 2013. As the world’s 16th-largest economy in 2012, with a GDP of Rp824trn ($824bn) and a population of 247m citizens, Indonesia has strong fundamentals for long-term growth. While the sharp reversal of foreign portfolio investment (FPI) flows from May 2013 emphasised economic imbalances, authorities are seizing on the sense of crisis as an opportunity for enacting needed structural reforms. Despite relatively high inequality and 115m people living on less than $2 a day, the large domestic consumption engine has insulated Indonesia from volatility in world trade. Since 2010 the services sector has become the major employer and accounted for 39% of GDP as of the second quarter of 2013. The manufacturing industry accounts for 23.8% of GDP, construction for 10.3% and mining for 10.4%. Despite disagreements on the pace of the slowdown, growth remains higher than emerging markets’ average of 4.5% in 2013, and points to the resilience of long-term drivers of economic growth. While policy continuity amid the political transition in 2014 will be an important factor in determining the pace of growth, the authorities will continue to balance the need to support domestic consumption growth with ensuring broader macroeconomic stability and the confidence of global investors. This chapter contains interviews with Dipo Alam, Cabinet Secretary; Jokowi, Governor of Jakarta; Suryo Sulisto, Chairman, Indonesian Chamber of Commerce and Industry; Jusuf Wanandi, Co-founder and Vice-Chairman, Centre for Strategic and International Studies; Edward Soeryadjaya, Chairman and Founder, Ortus Holdings; Prijono Sugiarto, President Director, Astra International; and Tri Rismaharini, Mayor of Surabaya.