The International Business Management students were asked to make comments and opinions about Indonesia’s GDP and its comparison with other nations and/or analysis of certain industry sectors in Indonesia. It is part of the International Business course short assignment taught by Dr. Marko S Hermawan. Let’s hear what they have to say.
Affan Fahreza Refardi
2nd Semester Student
Indonesia, currently the world’s fourth most populous country, has a vast and diverse economy that ranks 16th largest in the world, with a nominal GDP of approximately $1.186 trillion USD in 2022. The country’s economy heavily relies on the exports of commodities such as oil, gas, coal, and palm oil, which account for a significant portion of its overall GDP. Additionally, manufacturing plays a significant role, contributing to over 20% of the GDP in 2019.
In recent years, Indonesia has been focusing on developing its tourism and service industries to further diversify its economy. As a member of both ASEAN and the G20, Indonesia plays a significant role in global trade and has numerous trade agreements with other countries. With its strategic location, large population, and abundant natural resources, Indonesia is an attractive destination for foreign investment and trade. Despite experiencing a contraction of 2.1% in its GDP growth rate in 2020 due to the COVID-19 pandemic, Indonesia is predicted to grow rapidly in 2022 by 5.2% due to the reopening of the economy. It increases in commodity prices, with growth anticipated to be maintained at 4.9% on average over the medium term (2023-25).
Arya Dwi Kalky
2nd Semester Student
Based on data, Indonesia is the world’s fourth most populous country with a population of around 270 million in 2020, and is projected to increase to 275 million by 2022 according to the population census. This growth in population is expected to contribute to the country’s GDP, despite the impact of the pandemic. In 2022, Indonesia’s GDP is estimated to reach $1.1 trillion with a GDP per capita of $4,000, indicating stable economic growth despite fluctuations like COVID-19. The GDP growth rate for 2022 is projected to be around 4.8%.
Factors contributing to GDP include consumption, investment, government spending, and exports/imports. Consumer spending is the largest contributor to Indonesia’s GDP, accounting for around 55% of the total. Investment spending accounts for around 32% of GDP, while government spending accounts for around 13%.
However, Indonesia’s dependence on natural resources such as coal, oil, and gas for exports is a concern. In 2022, Indonesia’s exports are expected to reach $212 billion, while imports are estimated to be around $211 billion. By managing these resources effectively, Indonesia can potentially attract investments from other countries, even neighbouring ones. This could further strengthen its economy, which is already bigger than those of Thailand, Malaysia, and the Philippines.
2nd semester student
In simple terms, GDP (Gross Domestic Product) is an economic indicator that adds up all the values of products or services produced in a country within a specific period. The government usually uses it to make decisions on taxes and policies that affect the economy. Indonesia has abundant natural resources such as oil, gold, coal, natural gas, copper, and others. Using the GDP formula (GDP = C + I + G + (X-M), where C is personal consumption, I stands for investment, G represents government spending, and (X-M) is net exports, I can assume from the data I collected that Indonesia’s GDP from natural resources from 1970-2020 had an average of 9.47%, with a low of 2.61% in 201€ and a high of 33.49% in 1979. The most recent statistic from 2020 is 2.76%. In comparison, the 2020 global average based on 183 nations is 4.64 percent. Additionally, based on the graph, Indonesia has the highest GDP in billion dollars compared to other countries such as Vietnam, Singapore, and Malaysia.
Overall, since natural resources have greatly contributed to Indonesia’s GDP, the country has attempted to diversify its economy and reduce its reliance on commodity exports. The government has implemented measures to encourage investment in manufacturing, services, and infrastructure and improve the business environment. The goal is that these actions will lead to long-term economic growth and development.
2nd semester student
The World Bank predicts that Indonesia’s GDP will reach $1.1 trillion in 2021, cementing its position as a key player in global commerce and markets. However, the COVID-19 pandemic has had a noticeable impact on the country’s GDP growth rate, which fell from 5.0% in 2019 to 2.2% in 2020 before rebounding to 4.4% in 2021. Indonesia’s GDP is calculated using the formula GDP = C + I + G + (X-M), where C represents consumption, I is an investment, G denotes government expenditure, and (X-M) is net exports. Historically, net exports have dragged down growth in Indonesia, while consumption and investment have contributed the most to GDP.
In 2022, Indonesia’s GDP growth is expected to rebound to 5.2%, supported by increased investment and consumption levels and a recovery in net exports. The government has implemented various policies to encourage growth, including investing in infrastructure, offering tax breaks, and changing regulations. However, Indonesia continues to face challenges such as corruption, inadequate infrastructure, and a sizable informal economy.
Although Indonesia’s GDP growth has been steady compared to other countries in the region, it has been slower than some of its neighbours. Vietnam, for example, experienced rapid growth with a 7.1% increase in 2021, while the Philippines also recorded higher growth rates than Indonesia. Despite these challenges, Indonesia remains an attractive international commerce and investment market, thanks to its expanding middle class and abundant natural resources.
2nd semester student
In 2021 Indonesia is ranked as the 16th highest GDP in the world with a total of $1.19 trillion, to the Global Trade/ Market Indonesia makes up for 1.23% of the world’s total GDP (data from dividing 96.1/1.19 trillion USD x 100). Indonesia’s GDP is high due to its high population of 273.8 (2021 World Bank) million people (statistica) as seen from the GDP formula of C + I + G (X-M). C is the number of consumptions within a country and is linked to the total amount of people within the population as the bigger the population is the bigger the consumption will be as more people will need to consume to meet their needs.
Compared to Thailand, Indonesia has a bigger market as Thailand only has a GDP of 505.95 billion USD this is because their population size is smaller as Thailand only has a population of 71.6 (2021 World Bank). This makes it so that the value of variable C in the GDP formula is smaller thus Thailand’s GDP is smaller than Indonesia.
When it comes to coffee exports Indonesia beats Thailand as Indonesia is ranked 13th when it comes to coffee exports by country that exported the highest dollar value worth of coffee during 2021 with a total of 851.7 million USD, while Thailand is ranked 86th with a total of 3.16 million USD.
However, from an international standpoint Indonesia is barely in the big 10 as compared with the biggest coffee exporter in the world, Brazil accounts for 16.1% of total coffee exports while Indonesia only has a share of 2.3% of coffee imports.
Compared to Brazil, Indonesia loses in terms of the amount of coffee exports in 2021 because Arabica coffee is the world’s benchmark coffee and it accounts for 75% of the world’s production of coffee and it is mostly made in Brazil (responsible for 40% of the world’s coffee supply) and Columbia, while Robusta Coffee makes up the other 25% and is mostly produced in Vietnam (responsible for 15% of the world’s coffee supply) and Indonesia.
References: World Bank, Trading Economics