Indonesia: Economic and Political Overview
Indonesia is seen as a future economic giant. It is the largest economy in Southeast Asia and the world's seventh by purchasing power parity (IMF). According to official governmental figures, Indonesia's economy, measured by GDP at current market prices, reached IDR 22,139.0 trillion in 2024, with a GDP per capita of IDR 78.6 million (USD 4,960.3). The economy grew by 5.03%, slightly slower than the 5.05% growth in 2023. Economic activity was supported by political campaigns and election spending, along with rising investment, which helped offset shrinking net exports, according to Statistics Indonesia. Investment growth reached 4.61% year-on-year, the highest in six years (data BPS). For 2025 and 2026, the IMF expects growth to remain stable, at around 5.1%; however, the re-escalation of global trade disputes poses a challenge for the future, increasing business uncertainty.
After experiencing a widening of the budget deficit during the pandemic, authorities have intensified fiscal consolidation efforts. Indonesia's unaudited 2024 budget deficit was smaller than expected, at IDR 507.8 trillion (USD 31.38 billion), or 2.29% of GDP, compared to the earlier estimate of 2.7% of GDP. This was wider than 2023's deficit of 1.61%. The government ended 2024 with IDR 45.4 trillion in excess cash, which can help address the 2025 deficit projected at 2.53% of GDP. Revenues rose 2.1% to IDR 2,842.5 trillion, while total spending increased by 7.3% to IDR 3,350.3 trillion. The 2025 expenditure plan is IDR 3,621.3 trillion. A key challenge for 2025 is boosting revenues after the planned VAT increase was scrapped in favour of applying it only to luxury goods. According to the IMF, the country’s debt-to-GDP ratio saw a marginal increase in 2024, reaching 40.5% (from 39.6% one year earlier), but should remain stable over the forecast horizon amid nominal GDP growth. Inflation went down from 3.7% in 2023 to 2.5% last year, within the central bank’s target of 1.5% to 3.5% for 2024 and 2025. While the bank cut rates in September, it has since paused rate changes due to financial market volatility and the rupiah's weakness.
The unemployment rate in Indonesia decreased from 5.3% to 4.9% in 2024, according to World Bank data, though youth unemployment remains high at 17.3%. The labour force participation rate increased to 70.6%, with female participation rising to 56.4%. However, real wages have stagnated, particularly in labour-intensive sectors, and the economy is not generating enough middle-class jobs. Indonesia has achieved enormous gains in poverty reduction, cutting the poverty rate by more than half since 1999, to approximately 9.4% of the population in 2023. While the average GDP per person (PPP) was estimated at USD 17,520 in 2024 by the IMF, the country has still one of the fastest-rising inequality rates in the East Asia region according to the World Bank.
| Main Indicators | 2023 (E) | 2024 (E) | 2025 (E) | 2026 (E) | 2027 (E) |
| GDP (billions USD) | 1,371.17 | 1,402.59 | 1,492.62 | 1,614.87 | 1,743.58 |
| GDP (Constant Prices, Annual % Change) | 5.0 | 5.0 | 5.1 | 5.1 | 5.1 |
| GDP per Capita (USD) | 4,920 | 4,981 | 5,248 | 5,623 | 6,015 |
| General Government Balance (in % of GDP) | -1.6 | -2.6 | -2.5 | -2.5 | -2.4 |
| General Government Gross Debt (in % of GDP) | 39.6 | 40.5 | 40.7 | 40.6 | 40.3 |
| Inflation Rate (%) | 3.7 | 2.5 | 2.5 | 2.5 | 2.5 |
| Unemployment Rate (% of the Labour Force) | 5.3 | 5.2 | 5.1 | 5.1 | 5.1 |
| Current Account (billions USD) | -2.14 | -14.71 | -17.85 | -23.08 | -24.51 |
| Current Account (in % of GDP) | -0.2 | -1.0 | -1.2 | -1.4 | -1.4 |
Source: IMF – World Economic Outlook Database, October 2021
Indonesia is a market economy with abundant natural resources, a young, large and burgeoning population (277.5 million), a labour force of 141.3 million people in 2023, and political stability. The country changed from being an economy that was highly dependent on agriculture into a more balanced economy which is lessening its traditional dependency on primary exports. The agricultural sector contributes to 12.5% of the country’s GDP and employs 29% of the active population (World Bank, latest data available). Indonesia is the second-largest natural rubber producer in the world. Other major crops include rice, sugarcane, coffee, tea, tobacco, palm oil, coconuts and spices. Besides, the country is the world's biggest nickel ore producer and has become a major exporter of stainless steel. Indonesian land area used for agriculture has been growing and is currently around 30%. This is mainly due to the establishment of large-scale plantations - in particular for palm oil production (second-largest export). The Central Bureau of Statistics (BPS) reported a significant 30% rise in agricultural, forestry, and fishery exports in 2024, primarily driven by increased coffee exports. As one of the world’s leading coffee producers, Indonesia benefited from growing global demand and higher commodity prices. Indonesia's wheat imports for 2024/25 are expected to drop 8% from 2023/24 when high demand from feed mills and events boosted imports to record levels. Rice imports are set to decline sharply in 2024/25 due to higher domestic production after the national logistics agency intervened in 2023/24 to compensate for a smaller crop. Increased corn production will also reduce imports, though strong demand from feed and wet milling sectors persists (data USDA).
Industry contributed approximately 40.2% of GDP and employed over 22% of the labour force in 2022 (World Bank). The Indonesian industrial sector encompasses a diverse range of industries contributing significantly to the country's economy. Key sectors include manufacturing (19% of GDP), which includes textile and garment production, automotive manufacturing, and electronics assembly, with notable hubs in cities like Jakarta, Surabaya, and Bandung. The mining industry, particularly in coal, palm oil, and natural gas extraction, remains a crucial pillar of Indonesia's industrial landscape, driving export revenues. Moreover, the country is witnessing the emergence of renewable energy as an increasingly important sector, with investments in solar, wind, and hydroelectric power projects aimed at diversifying the energy mix and reducing dependence on fossil fuels. Infrastructure development and construction also play pivotal roles in Indonesia's industrial growth, spurred by ongoing urbanization and investment in transportation networks. Additionally, technology-driven sectors such as information technology (IT) and telecommunications are experiencing rapid expansion, fueled by a growing digital economy and increasing connectivity. Indonesia's manufacturing sector closed in 2024 on a positive note, with PMI rising for the first time since mid-year, along with growth in sales and production capacity by December 2024 (data S&P).
The service sector contributes to 42.9% of the GDP and employs around 49% of the active population (World Bank). Key subsectors include tourism, which capitalizes on Indonesia's rich cultural heritage and natural landscapes, drawing millions of visitors annually (BPS recorded that from January to November 2024, Indonesia welcomed 12.66 million foreign tourists, marking a 20.1% increase y-o-y and the highest figure recorded in the past five years), finance, telecommunications, and retail, which have historically been significant contributors to Indonesia's GDP. With the rise of technology and digitalization, emerging sectors such as e-commerce, fintech, and digital services are gaining momentum, reflecting the country's growing connectivity and innovation landscape. Additionally, Indonesia's vast archipelago and rich cultural heritage foster opportunities in hospitality, entertainment, and creative industries.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 28.8 | 22.1 | 49.1 |
| Value Added (in % of GDP) | 12.5 | 40.2 | 42.9 |
| Value Added (Annual % Change) | 1.3 | 5.0 | 6.1 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}
Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation
The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
Source: The Economist Intelligence Unit - Business Environment Rankings 2021-2025
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Latest Update: February 2025
