Table of Content
Executive Summary 3
Trends in growth, inflation, unemployment and debt 4
Current monetary and fiscal policies of the government 6
Social policies that the government is pursuing 8
What are the country’s exchange rate, and trade policies? 8
1) Exchange rate (Indonesian Rupiah (IDR) relative to USD) 8
2) Import 9
3) Export 9
4) Free Trade 10
SWOT Analysis 10
Graph 1, Government Expenditures/GDP
Graph 2, Debt/ GDP
Graph 3, Imports and Exports of Goods and Services
Graph 4, Real GDP
Graph 5, Real GDP per capita
Graph 6, Growth rate
Graph 7, Exchange Rate
Table of Data
In the following Indonesia is going to be analyzed, as it is one of the MINT countries, which is defined by economist Jim O’Neill as emerging economic giants. Indonesia is a country that has high potential for future economic growth.
It has a very large and young population of 250 million with a strong workforce of 120 million people. The political environment and the legal system are favorable to business growth and the new president, Joko "Jokowi" Widodo, who was elected as new president in October 20, 2014 promises change. With his former position as governor of Jakarta, he fought against corruption, improved infrastructure and created a free health care system. These aspects are also on his program for whole Indonesia, and therefore promises major improvements for the country.
Indonesia’s geographic location is favorable because it is in the center of South-East Asia and close to emerging economies like India and China. It is member of the Association of South East Asian (ASEAN) Free Trade Area, also called AFTA. This means that by 2015 all the South East Asian countries can trade tariff free.
However, since 2009 the growth trend observed in the Gross Domestic Product has lowered. Some of the main challenges the country is facing are the lack of infrastructure, the high competition with surrounding countries, and the ongoing corruption.
The paper is giving information about the growth of Indonesia with a closer look on its inflation, unemployment and debt. Then the current monetary and fiscal policy is given and the insight of the social policies that the government is pursuing is presented. Afterwards, the country’s exchange rate and trade policies are examined. In the following, Indonesia’s strength, weaknesses, opportunities and threats are analyzed. As this contains a lot of information, each factor is divided in the Pestle Analysis. This means that Political, Economic, Social, Technological, Legal and Environmental aspects are given, that lead to either strengths, weaknesses, opportunities or threats of Indonesia.
Trends in growth, inflation, unemployment and debt
Indonesia is one of the constant growing economies in the world, and largest economy in South East Asia. Its yearly growth rate has been above 5% in the last few years. Their industry sector, 46.5 percent of total GDP, especially manufacturing (24 percent of total output) is a key playing factor in the economy. The other two sectors are Services sector, 37 percent of total GDP, and Agriculture, 15 percent of total GDP.1
Export is one of their important sectors, especially to China, Japan, USA, and India, contributes 20 percent of their GDP. This is an indicator, that if we take a future look, all their trends depend on foreign investments and their exports. Their export sectors have performed weaker in the last 2 years. The central bank tries to maintain a lower inflation rate by a tighter monetary policy2, for example by increasing the discount rate, which is a fact that lowers the export. It also tries not to lose foreign investors and make them more confident for pursuing Indonesia.
Joko "Jokowi" Widodo was elected as new president in October 2014 for