Economic ascension of Indonesia
Indonesia's Economic Transformation: A Journey Towards Global Competitiveness
Indonesia, the world's fourth most populous nation, is on a path to transform its economy, promising a stable currency, lower borrowing costs, and a reduction in country risk premium over the coming years. This transformation is driven by a robust GDP growth, strategic government reforms, abundant natural resources, and a rapidly expanding digital economy.
The economic growth is largely fueled by strong performance in the agriculture and manufacturing sectors. In Q2 2025, Indonesia's GDP growth reached between 4.04% and 5.12%, outperforming regional peers. This significant rebound was largely due to a 9.74% QoQ increase in agriculture and growth in nickel-driven electric vehicle supply chains.
Government reforms have played a crucial role in this economic transformation. The establishment of special economic zones (SEZs), tax incentives that attracted $24.7 billion in foreign direct investment (FDI) in early 2024, and policies aimed at transforming the economy from upstream raw materials to downstream manufacturing are some of the key initiatives. These reforms include the development of green industrial zones, workforce training, and infrastructure improvements, which are expected to foster long-term resilience and economic diversification.
Indonesia's wealth of natural resources, particularly nickel, palm oil, coal, copper, and bauxite, supports its mining and processing industries. The government's emphasis on promoting local processing facilities rather than just raw exports encourages moving up the value chain, further enhancing economic complexity and value addition.
Moreover, Indonesia's digital economy is expected to quadruple by 2030, with digital payments alone projected to grow 2.5 times. This signals a significant transformation towards a technology-driven economy.
Additional growth areas include strengthening the Islamic economy and finance sector—Indonesia ranks third globally in this space—with developments in halal products, Islamic banking, tourism, and waqf management, supported by the National Committee for Islamic Economy and Finance (KNEKS).
However, challenges remain, such as environmental and regulatory risks, poverty, inequality, education gaps, infrastructure bottlenecks, and climate change impacts, which require ongoing management to sustain growth.
Indonesia's strong trade ties across Asia, Europe, and the Americas solidify its global integration. The country presents opportunities for businesses seeking expansion in Southeast Asia, with a focus on infrastructure, digitalization, and sustainability.
One of Indonesia's strategic moves is to ban unprocessed mineral exports, aiming to transform its primary natural resource sector into a higher value-added industry. This decision has attracted global manufacturers to invest in processing plants onshore in Indonesia.
The global EV market is expected to grow at a CAGR of 18% to reach $1.6tn by 2030. Indonesia aims to develop its nickel-based industries to become a global battery and EV supplier, potentially benefiting from this growing trend.
In summary, Indonesia's economic transformation and growth potential rest on its natural resource wealth, strategic government reforms focusing on industrial diversification and infrastructure, rising digital and Islamic economy sectors, and its role as a key player in global supply chains—particularly in sustainable and high-tech industries like electric vehicle batteries.
- The robust growth in Indonesia's GDP, driven by strong performance in agriculture and manufacturing sectors, indicates a promising outlook, even for non-traditional industries like sports, given the country's potential for long-term resilience and economic diversification.
- The government's emphasis on local processing facilities, particularly in the nickel industry related to electric vehicle supply chains, may create opportunities for sports equipment manufacturers that utilize nickel, further expanding Indonesia's industrial sectors.
