Indonesia enjoys Southeast Asia’s largest economy. Sadly, numerous problems make it one of the region’s worst performing.
They’ve lagged behind frontier market peers such as Vietnam and the Philippines over the past decade. Meanwhile, Indonesia’s GDP growth is stagnant at around the 5% range – mediocre for an emerging economy.
Indonesia’s economic problems will unfortunately keep posing a big challenge throughout the next decade. Some issues can be solved with time and money. Yet others are more structural in nature and will stay around for awhile.
Fixing Indonesia’s economic issues will require greater effort than anyone is putting forth right now. Both the government and private sector are falling way behind on implementation, even if there’s plenty of talk and meetings.
For starters, let’s take a look at some good things about the Indonesian market. The nation is Southeast Asia’s biggest in terms of both population and economic size.
Indonesia is among the world’s largest exporters of automobiles, petroleum and palm oil too. Furthermore, they haven’t suffered negative GDP growth since the 1998 Asian Financial Crisis. That’s more than 20 years without a recession.
Indonesia isn’t alone though. Right now, Just two countries in Southeast Asia have reached full compliance with ASEAN Economic Community’s requirements: Malaysia and Singapore. Those are also the region’s two most developed economies, so it’s probably not coincidental.
We still think that Indonesia’s massive population of 250 million people, strong demographics, and rising middle class bode well for the country’s future. Yet Indonesia’s economic problems can only be solved if they can learn a thing or two from their neighbors.
If you’re a real estate or stock investor, think about looking elsewhere for your frontier market exposure. Cambodia and Vietnam, among other places, have much of Indonesia’s upside and less of its drawbacks.