World Bank: Indonesia World’s 10th Largest Economy

By Jakarta Globe on 11:29 pm May 04, 2014
An employee of Bank Negara Indonesia moves a pack of 100,000 Rupiah notes at the bank's head office in Jakarta in this Dec. 21, 2012 file photo. (Reuters Photo/Supri/Files)

An employee of Bank Negara Indonesia moves a pack of 100,000 Rupiah notes at the bank’s head office in Jakarta. (Reuters Photo/Supri)

Jakarta. Indonesia has the 10th largest economy in the world, according to a recent report by the World Bank, with the country contributing 2.3 percent of global economic output.

The report released the findings of the 2011 International Comparison Program (ICP), which assesses economies based on purchasing power parity (PPP) and noted that Indonesia moved up six places and leapfrogged more developed countries such as Spain, South Korea and Canada.

The ICP round gathered over 7 million prices from 199 economies in eight regions, with assistance from 15 regional and international partners.

In the top nine are the United States, China, India, Japan, Germany, Russia, Brazil, France and Britain.

The middle-income economies of Indonesia, China, India, Russia, Brazil and Mexico now account for 32.3 percent of world gross domestic product. That compares with the 32.9 percent contributed by the six largest high-income economies, United States, Japan, Germany, France, United Kingdom, and Italy. The report also showed that the United States was about to lose its status as the world’s biggest economy, as China is likely to surpass it by the end of this year, faster than widely anticipated.

The United States has been the biggest economy in the world since overtaking the United Kingdom in 1872.

The Organization for Economic Cooperation and Development (OECD) has predicted that China will overtake the United States by 2016 while China itself is hoping to become number one by 2019. According to the report China’s GDP was nearly 87 percent of the US GDP in 2011, while India had moved up from being in 10th position in 2005 to the third-largest economy, overtaking Japan.

However, some say the PPP is just one measure to judge the performance of the world’s economies and that developing nations like India and China still have a lot of catching up to do.

“When, for example, we measure international purchasing power expressed in dollars, which matters in international trade, the United States, Europe and Japan continue to be the dominant economies in the world,” Frederic Neumann, co-head of Asia economic research at HSBC in Hong Kong said as reported by International Business Time, which quoted CNBC.

President Susilo Bambang Yudhoyono was quick to respond. “This morning I received a report that Indonesia has become the world’s 10th largest economy. Thank God, it is all of our efforts and hard work,” he said through his twitter account.

He said the nation continues working to reach higher levels of prosperity.

“This is of course a good start. But we still have a long way to go as we are facing many challenges. However, God willing, we can overcome those challenges,” he told a gathering in Jakarta later in the day.

Finance Minister Chatib Basri said the achievement was an endorsement of the government’s economic policy. “That means Indonesia’s economy is on the right track and we have made significant progress because a couple years ago we were in 16th position,” Chatib said, as quoted by Detik on Sunday.

But many other reports pointed out that while the rise of Indonesia should be praised, it has an uneven growth rate, with a widening gap between rich and poor.

Citing a forthcoming report by the World Bank, the Economist warned that real consumption grew by about 4 percent a year on average from 2003 to 2010. But for the poorest 40 percent of households it grew by only 1.3 percent. In contrast, consumption by the richest 20 percent grew by 5.9 percent.

Based on this data, the magazine concluded that the rich are getting richer much more rapidly than the poor.

The growing inequality between low-income groups and high-income groups has also been indicated by the country’s worsening Gini coefficient — which represents income disbursement — from 0.29 in 2000 to 0.38 in 2011, a drop of almost a third in equality.

The Economist also points to the fact that the informal sector accounts for 70 percent of the country’s GDP, meaning that the vast majority of Indonesia’s working population has no guarantee of minimum wage and protection from the government.

People are forced to go informal because manufacturing in Indonesia is hamstrung by decrepit infrastructure, rigid labor laws and protectionist policies that make it difficult for its factories to be competitive, according to the magazine.

Indonesia has increased its social spending, the magazine reported, adding that the government has bold plans to introduce universal health care by 2019.

However, government spending is still skewed towards the rich, with about 20 percent of the central government’s budget, or 282 trillion rupiah ($24.5 billion) this year, going on energy subsidies. Cheap gasoline benefits the rich, who are its biggest consumers.

  • Topeka

    Oh well, it couldn’t have had happened if it were pdip in power , god as the witness, if you believe in that, stop this round to have another pdip candidate as president elect , no one can afford to have another round of selling state assets below market place. Kpk must investigate right away what they had done to destroy the country and not allowing the party to run in this election for president. Thanks pak sby. Soft power is the way to go. , how about world we are getting rid of sunset empire totally from top 15, good idea world?

    • akepot

      funny stuff from you. As the 10th largest economy power, why do we still have so many poor people and lack of working opportunity. Where does all of this money go ? Soft power ? Yeah, soft to his buddies’ pocket. One more thing, for PDIP case, when Mega reigned for 2 years, she reduced a lot of the country’s international debt

      • sugarfree

        and, not to mention, sold many of our state-owned companies, didn’t she?

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  • http://www.shareintl.org/ JAHAAN

    There are reports everywhere about economic successes that actually go hand in hand with a very gradual decline in living standards. People wonder how that is possible, even though it is so gradual many don’t seem to notice anything in emulation to their superiors as their pockets are emptied from behind and they get more and more suspicious to those they have in front of them, with newer and newer laws to protect them against looking them in the eye for the truth.

  • Donaldy Sianipar

    Instead of using Income-per-Capita or GDP-per-Capita, I’d like to suggest that we use the Q1, Q2, and Q3 (Quartiles) of Net Income of the people (for each country in each year).

    Q0 = Minimum
    Q1 = Lower Quartile
    Q2 = Median
    Q3 = Upper Quartile
    Q4 = Maximum

  • JadeMacaque

    Indonesia no 10 world largest economy ??
    No 10 despite of::
    :: Billions of embezzlement(corruption)/quarterly.
    ::30% fuel subsidy out of the annual budget.
    ::2013 annual flood related damages to property, production loss time,could reach 3,3bilion $.
    ::Dismal fiscal coffers, so the intended expenditure government’s spending could only be implemented by bonds( borrowed money).
    ::Indonesian Pension system is inadequate, loss of consumption/spending money in old age.
    Surely the GDP of the poor(50% of the population, rising caused by the GDP of corruption) ranks at the bottom 10 of the World’s bank assessment.
    Never mind to all this mind boggling ODDS, congratulation to this genuine classification.

    • dirk

      Hi Jade, you must be a bitter Australian! Go get a life, this fact isn’t good for you!

    • dirkjakarta

      You must be a pathetic bogan OZ coming from Sunburry Vic. Go get a life. Envying is not good at all!

      Tell your government to stop acting like drag queen Nazy towards the asylum seeker!

  • dirkjakarta

    you mean Australia? Read this, their what so called is less than 0.01 of our GDP and it was under the debt scheme based on their own initiative which on many occasions have hidden agenda. What acting like an irresponsible country? Yes it cannot be denied this country has countless corruption cases, but don’t ever mention those “poor” or the other nine richer countries don’t encounter the same problem (or maybe worse). Tell to your bogan fella down under that spying is an utter shameful act, you filthy descendant of convicts and criminals!

    PS: Stop spreading BS propaganda about West Papua!