Indonesia’s economic growth in 2017 is set to improve.
Indonesia’s Small and Medium Enterprises (SMEs) sector is currently grappling to overcome a host of tough new challenges. With the government now more determined than ever to push the growth of SMEs, the sector could be in a position to turn these challenges into exciting opportunities.
Having weathered the worst of 2015, Indonesia entered 2016 with the expectation that the new year would offer a welcome reprieve to local industries under pressure. Despite what appeared to be positive momentum at the close of 2015, early results from this year suggest that Indonesia is not yet out of the woods.
Coinciding with a shift in the centre of modern business eastwards towards Asia, family-owned businesses stand to play an outsized role in future growth. In no market is the significance of understanding this type of business structure more apparent than in Indonesia, where 95% of local businesses are family-owned.
Blaming global markets for economic woes at home has long been the hallmark of Indonesian policymakers when it comes to explaining less-than-favourable developments to the electorate. However, this defensive stance appears to be changing, which bodes well for the country’s economy in 2016.
The fact that Indonesia largely has itself to blame for the slowdown is a good thing, for it means that the country is not at the mercy of fickle global markets, but that the government can take practical steps to reinvigorate the national economy.
While the external environment will continue to have a profound impact on Indonesia's economy this year, only domestic structural reforms can secure the country's economic performance in the future.
FDI in Indonesia has continued to grow strongly despite macroeconomic difficulties and political uncertainties. In the first three quarters of 2014, BKPM registered inbound FDI amounting to 228.3 trillion RP, up 14.6%.
Supported by improving infrastructure, rising spending power and government incentives, regions outside of Java can outperform in terms of both investment and economic growth. Investors willing to look beyond the mainstays of Jakarta, West Java and Bali benefit from early-mover advantages.
Public policies and statements by Joko Widodo could provide some clues as to where Indonesia is headed after the inauguration of the new administration in October 2014 and what it might mean for trade and investment.
In many ways, 2013 was a sobering experience for an economy that overflowed with self-confidence just two years earlier, and it begs the question as to what 2014 holds in store.
Population: 255 million (estimated, 2015)
Currency: Indonesian Rupiah
Nominal GDP: $895 billion USD (IMF, 2015)
GDP per capita: $3,415 USD at Current Prices (IMF, 2015)
GDP Growth: 4.7% (2015)
External Debt: 34.77% of GDP (BI, Q3 2015)
Ease of Doing Business: 109/189 (WB, 2015)
Corruption Index: 107/175 (TI, 2014)