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The Emerging Tiger

Having previously been overlooked in favor of other countries in Asia such as India and China; Indonesia economy is now hard to ignore.

Its peculiar characteristics are now coupled with political stability, self-reliance and robust economic growth which saw the country largely shielded from the global economic crisis. Indonesia now finds itself at a key point in its transition from that of a low income to middle-income economy and from a primary producer to a value added exporter as well as a knowledge-based economy. Investment opportunities are ripe in all sectors; ranging from infrastructure to manufacturing and services. This represents a window of opportunity for investors to participate in a market in the world’s fastest growing region that exhibits strong fundamentals and is poised to flourish.

Undoubtedly, Indonesia possesses the fundamentals to be a leading global economy over the coming decades.

indonesia-economy-review
indonesia economy overview

Resources

ndonesia is endowed with diverse natural resources and is strategically positioned among markets from which there is high demand for them. The country was the only South East Asian member of OPEC until 2008 and continues to be a major liquid natural gas (LNG) exporter. In energy and mining, Indonesia is the world’s leading thermal coal exporter, the largest tin exporter and home to vast deposits of precious metals such as gold, silver and copper. Its unique topography yields highly sought after attributes.

The vast availability of land and the low levels of productivity in many of these key crops give the scope for increased output. Indonesia’s geographical proximity to energy and resource hungry China and India provide natural markets for future exports alongside its own rapidly growing domestic market.

Large & Youthful Domestic Market

As a country of some 240 million people and growing, the size of the Indonesian domestic consumer market is an alluring attribute for any investor. The country’s resilience over the course of the global financial crisis illustrated the merits of its immense population and economic self-reliance. Bucking the trend of most other G20 economies, in 2009 the country recorded 4.5% GDP growth and achieved higher than expected growth of 6.1% in 2010. This can be attributed to strong private consumption which accounts for over 60% of total GDP. This placed the country in good stead as demand for exports from developed markets tailed off with the financial crisis leaving many other emerging economies in a state of flux.

In terms of future outlook, Indonesia economy is entering a ‘sweet spot’ as a convergence of its young, working population with that of relatively stable inflation and sustained economic growth is fuelling consumer spending. There is much to be said for Indonesia’s demographics as a key component of its future growth potential. Over 50% of the population is below the age of 30, is highly adaptive to new technology and has a low dependency ratio among its workforce giving rise to a so-called ‘transitional demographic dividend’. This is in marked contrast to countries such as China where an aging population and a high dependency ratio due to the one child policy is taking its toll.

gdp

For Indonesia economy, this optimal environment is projected to continue for another decade to 2020, according to the World Bank, after which the population will begin to age faster and modern lifestyles reduce the birth rate.

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