Indonesia Rising

Here are some figures to illustrate the changes: 

Annual economic growth in Indonesia seems to have settled at about 5% recently. In the last 20 years, per capita GDP in Indonesia has risen by about 250%.

The source of that growth is not large trade surpluses; indeed, Indonesia has recently been running trade deficits. 

Indonesia's growth also doesn't come from government fiscal stimulus. The ratio of public debt/GDP has been falling in Indonesia. 

A number of East Asian countries have passed through a period of a "demographic dividend," when their economies got a boost because the size of the working-age population was relatively large compared to the rest of the population. Indonesia is still in that "demographic dividend" period, and expects it to last for another several decades. "Demographic trends are expected to increase Indonesia’s annual real GDP growth by close to 1 percentage point during 2020−50.5 This boost is substantial and positions the country relatively well compared with peers in Asia, many of which are set to endure a reduction of real GDP growth as a result of adverse demographic trends ..."

Finally, here is a list of some social indicators (trimmed down from a more extensive chart in the paper). Poverty and infant morality are way down, while education, life expectancy, and access to clean water, electricity, and the internet are on the rise. 

Indonesia of course faces a number of ongoing issues as well, and the chapters of the book discuss them in some detail. They include "rigid labor legislation," "low tax revenues and thin domestic financial markets," "the low level of FDI and low participation in global and Asian value chains, "one of the lowest internet penetration rate in the ASEAN region," and others. "[D]espite strong demographic tailwinds and steady capital accumulation, lower productivity growth has led to a decline in potential output growth in recent years." Indonesia's economy is somewhat vulnerable if/when China's economic growth slows down. Indonesia is a country spread out across thousands of islands, where hundreds of languages are spoken, so there is also inequality and outbreaks of ethnic tensions. There are concerns about challenges to Indonesia's democratic system. 

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Gary Anderson 5 months ago Contributor's comment

I believe this narrative. Yes, weakness in China could bring weakness to Indonesia. But Trump pushes Indonesia away while Asia bonds. This is bad news for tariff warriors but good news for world stability in the long run. www.talkmarkets.com/.../are-policy-refugees-jumping-the-trump-tariff-ship