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Indonesia’s economy grew by 6.5% in 2011, marking the highest percentage in over a decade. This GDP growth, however, is not unprecedented because in seven of the last eight years Indonesia’s GDP has grown by more than 5%. In the last couple of years, corporations and investors have begun to compare Indonesia’s economic growth potential with the likes of India and China. Strong growth and political stability are two of the main reasons why corporations and investors share this confidence.
Another great sign for Indonesia’s economy is that foreign direct investment increased by 20% last year. The abundance of natural resources and a large consumer market, consisting of 240 million people, continue to attract foreign investors. Economist Kun Lung Wu sums up Indonesia’s past and prospective economic gains when he states, “Indonesia’s GDP growth has been remarkably stable and robust in 2011, in line with our view that Indonesia will remain a beacon of growth in a world where growth is scarce.” Indonesia currently represents the largest economy in Southeast Asia, and last year experienced higher economic growth than any of its neighbors in this region.
Bambang Brodjonegoro, the head of the Finance Ministry’s Fiscal Policy Board in Indonesia, stated that exports will not be as big of a contributor to economic growth in 2012, and because of this the focus will now be on boosting private and public investment. The average Indonesian consumer is becoming increasingly confident and affluent, and domestic companies are profiting despite foreign economic turmoil.
Critics claim that a lack of infrastructure will prevent Indonesia from reaching the next level of GDP growth. The Indonesian government is aware of this problem and recently passed a bill that aims to expedite land purchases for infrastructure. If this bill is successful in what it hopes to achieve, investment will likely increase in the long run and hopefully result in increased economic growth.
Hopefully Indonesia will experience continued growth in its economy, as this not only benefits consumers and corporations in Indonesia, but foreign investors and consumers around the world as well.
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