Indonesia could become world's 7th largest economy by 2030: report
2012-09-18 17:19:05
Indonesia could be the world's seventh largest economy by 2030, if it takes decisive action and practical steps to drive growth.
If it does, it will overtake developed economies like Germany and the United Kingdom.
Indonesia is currently the 16th largest economy in the world, according to a new report by the McKinsey Global Institute called "The Archipelago Economy: Unleashing Indonesia's Potential".
The report said that Indonesia has the lowest volatility of economic growth of any OECD or BRIC economy, while government debt has fallen by 70 per cent and is lower than most OECD economies.
Indonesia is also expected to add 90 million people to its consuming class as its population continues to grow and urbanise.
To ensure long-term resilience of the economy, the report said Indonesia faces the challenge of managing increasing demand.
Over the next two decades, demand for energy could triple, while demand for steel could expand by 170 per cent.
By 2030, water demand could outpace supply by more than 20 per cent.
Chairman of McKinsey in Indonesia, Raoul Oberman, said these concerns place Indonesia at a "critical juncture".
Mr Oberman said: "It needs to build on its recent impressive performance to boost labour productivity to 4.6 per cent - that's 60 per cent higher than in the past decade. It also needs to tackle concerns about rising inequality and manage soaring demand from its expanding consumer class to meet the government's longer term GDP growth targets."
To achieve this, the report proposes action in four priority areas: transform consumer services, boost productivity in agriculture and fisheries, build a resource smart economy and invest in skill building.
President-director of McKinsey Indonesia, Arief Budiman, added that if these measures are successful, they could create a US$1.8 trillion market opportunity which will benefit all Indonesians.