Updated: Dec 7, 2022
Indonesia is increasingly being seen as a high-yield destination for international investors across multiple industry sectors. With aggregate investment inflows of USD 20 Bn in 2021, the nation is ranked within the ‘Top 10’ of all developing countries in respect of total foreign direct investment (FDI) activity.
Inbound FDI has continued to flourish in 2022, with the outturn for the third quarter showing a year-on-year increase of 64%. The overall funding commitment of IDR 169 trillion (USD 10.8 billion) in 3Q 2022 represents an impressive multi-decade high for Indonesia.
Having secured political and social stability - coupled with macro-economic resilience - Indonesia is advancing rapidly as one of the most vibrant democracies in the East Asia and Pacific (EAP) region.
As the holder of the Group of 20 (G20) Presidency for the year 2022 – culminating in the highly-successful Summit held in Bali in November 2022 - the Government has leveraged this global platform to promote Indonesia as a progressive and assured lower middle-income nation.
And In 2023, Indonesia will assume the Chair of the Association of Southeast Asian Nations (ASEAN). This provides a further opportunity to stimulate the strengthening of broader economic and political ties – both across the ASEAN member states and between the ASEAN bloc and the neighbouring East Asian countries.
In the face of myriad global challenges (i.e. aggressive monetary tightening by the US Federal Reserve, the Russia-Ukraine war in Europe, economic stagflation risk, a looming recession in many Western nations, continuing supply chain disruptions and insipid growth in China) - exacerbated by significant fuel price hikes in the domestic market - Indonesia has managed to sustain robust economic growth.
Based on the latest data from Indonesia’s Statistical Agency (Badan Pusat Statistik - BPS), the Indonesian economy expanded by 5.72 % (YoY) in Q3 2022 – based on a) strong export performance (primarily in the coal, palm oil, and iron and steel industries), b) continuing direct investment flows (both domestic and foreign), and c) a sharp increase in government spending.
Moreover, the International Monetary Fund (IMF) expects the Indonesian economy to grow by 5.3 % in 2022 (YoY) and 5.0 % in 2023. By comparison, global growth is predicted by the IMF to be flatlining at 2.4 % in 2022 and 1.6 % in 2023.
Our latest Wellington Perspective is intended to provide investors - both current and prospective - with an impartial context for assessing the prevailing economic and investment climate in Indonesia.
And for a deeper dive into the growing presence of Indonesia within the global economy, please refer to our earlier Wellington Perspective and Report "Indonesia's Growing Stature on the Global Stage".
Alternatively, please feel free to contact us, should you wish to discuss any aspect of this report.