Economic Analysis


Population 272.2 million
GDP per capita 4,361 US$
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major macro economic indicators

  2020 2021 2022 (e) 2023 (f)
GDP growth (%) -2.1 3.7 5.3 5.0
Inflation (yearly average, %) 2.0 1.6 4.2 4.4
Budget balance (% GDP) -6.1 -4.6 -2.4 -3.0
Current account balance (% GDP) -0.4 0.3 0.7 -0.8
Public debt (% GDP) 39.8 41.2 41.0 40.4

(e): Estimate (f): Forecast


  • Diverse natural resources (agriculture, energy, mining)
  • Low labour costs and demographic dividend
  • Growing tourism industry (6% of GDP in 2019)
  • Huge domestic market
  • Sovereign bonds rated “Investment Grade” by the three main rating agencies
  • Exchange rate flexibility


  • Large infrastructure investment gap/low fiscal revenues (12% of GDP)
  • Exposure to shifts in Chinese demand
  • Market fragmentation: extensive archipelago with numerous islands and ethnic diversity potentially leading to unrest (Papua)
  • Highly exposed to natural disasters (volcanic eruptions, hurricanes and earthquakes)
  • Persistent corruption and lack of transparency
  • Dependency on raw material exports (20% of total exports)

Risk assessment

Growth should be robust despite headwinds

Despite a weakening global environment, Indonesia’s growth is set to be robust in 2023. The economy will continue to benefit from the recovery in private consumption (56% of GDP) which has followed the gradual lifting of Covid-related measures and the return of international tourism in 2022. Accordingly, tourism-related services, including catering, hospitality, and transport, are especially expected to expand. The recovery will be helped by improvements in the job market. Indonesia’s jobless rate was 5.9% in the third quarter of 2022, down from the 7.1% posted in the same quarter of 2020.  Although it should remain elevated in 2023, due to the hike in fuel prices implemented in September 2022 and the economic recovery, consumers should also continue to benefit from manageable inflation. Having said this, faced with the depreciation of the Indonesian rupiah against the US dollar and rising headline and core inflation, Bank Indonesia started to tighten its monetary policy in August 2022. As at end-January 2023, the central bank had raised its policy rate by a cumulative 225 basis points. Tighter monetary conditions are likely to weigh on household demand. Private investment should also be affected by this. In addition, a law passed in December 2022 allows the central bank to buy government bonds on the primary market in times of economic crisis to hence finance public debt. This could raise concerns among investors as the measure weakens central bank independence.  Nevertheless, the continuation of the economic recovery, and the expected entry into force of the Omnibus Act, which seeks to deregulate foreign investment rules and labour reforms, will drive private investment. Meanwhile, public investment will be supported by infrastructure projects, notably in transportation, digital, and the construction of the new capital city. The healthier tourist industry and elevated commodity prices – Indonesia is a net exporter of palm oil, coal, and gas, among others – should support exports (23% of GDP). However, the latter will grow at a slower pace amid weaker global demand. Moreover, export performances are at risk of new or stricter export restrictions. In order to curb rising prices, the government has used such measures for palm oil in 2022 and 2023, with palm oil exporters forced to ship six times their domestic sales volume as of 1st of January 2023, down from eight previously. Meanwhile, a ban on bauxite is expected to take effect in June 2023, this time in order to enhancing local processing.


Fiscal policy will remain prudent

The budget deficit narrowed to 2.4% of GDP in 2022, significantly lower than initially planned thanks to post-Covid reopening and spiking commodity prices. In an bid to lock in fiscal consolidation and return the public deficit to below 3% of GDP, the government announced spending cuts for 2023. Government spending will focus on enhancing long-term growth prospects through education (20% of total spending), and eradicating poverty and inequality (16%). However, the normalisation of raw material prices and slower GDP growth is expected to weigh on revenue, resulting in an increased public deficit.

After the small surplus in the previous two years, we expect the current account to swing back to a slight deficit in 2023. The trade surplus will narrow from a record high in 2022 on back of commodity price normalisation and global economic slowdown. Meanwhile, tourism receipts will help lower the services deficit, whereas that of the primary income balance, which contributes the most to the overall current account deficit, will widen, fuelled by higher profit repatriation following accelerated GDP growth in 2022 and higher debt interest payments. Investment, especially in the form of FDI, should cover the deficit. Foreign exchange reserves should therefore remain adequate, standing at 6 months of imports (at December 2022).


The end of the Jokowi presidency looms

President Jokowi was re‐elected for a second five‐year term in April 2019. His legislative and governmental coalition centred around the Indonesian Democratic Party of Struggle (PDIP), which was originally created from nationalist groups and Christian-based parties, controls more than 80% (471 out of 575 seats) of the lower house (Dewan Perwakilan Rakyat). His popularity among the population remains high and has increased. A poll conducted at the start of 2023 gave him an all-time high approval rating  of 76.2%. The PDIP will, however, need to find another leader ahead of the 2024 elections, as the Indonesian constitution does not allow the President to run for a third term. Meanwhile, some of the coalition parties are expected to announce their own candidates, which could unsettle the government’s last year in office. On the external front, Indonesia has remained neutral over the Ukraine-Russia war. After hosting the G20 summit meeting in October 2022, Indonesia will play a central role at regional level, taking over the chairmanship of ASEAN in 2023. 


Last updated: June 2023


Cash, cheques, and bank transfers are each popular means of payment in Indonesia. SWIFT bank transfers are becoming more popular as an instrument of payment for both international and domestic transactions due to the well-developed banking network in Indonesia.

Standby Letters of Credit constitute a reliable means of payment because a bank guarantees the debtor’s quality and repayment abilities. Furthermore, the Confirmed Documentary Letters of Credit are also considered reliable, as a certain amount of money is made available to a beneficiary through a bank. 

Debt collection

Amicable phase

The first step to recovering a debt is to negotiate the issue with the debtor to attempt to resolve the issue amicably. There is an inherent Indonesian culture and ideology (Pancasila) where amicable settlement is encouraged. Creditors usually issue a summon/warning letter to the debtor, which outlines a statement concerning the debtor’s breach of commitment. The letter also calls for a discussion to determine whether the dispute should be settled through the court system. If the amicable phrase does not result in a settlement, the parties may trigger legal action.


Legal proceedings

The Indonesian judicial system comprises several types of courts under the oversight of the Supreme Court. Most disputes appear before the courts of general jurisdiction, with the Court of First Instance being the State Court. Appeals from these courts are heard before the High Court (a district court of appeal). Appeal from the High Court, and in some instances from the State Court, may be made to the Supreme Court.


Ordinary proceedings

Ordinary legal action may commence when the parties have been unable to reach a compromise during the amicable phase. The creditor may file a claim with the District Court, who is subsequently responsible for serving the debtor with a Writ of Summons. If the debtor fails to appear at the hearing to lodge a statement of defence, the court has discretion to organize a second hearing or to release a default judgment (Verstekvonnis).

Prior to considering the debtor’s defence, as previously mentioned, the court must first verify whether the parties have tried to reach an agreement or amicable settlement through mediation). If the parties have undergone the mediation process, the panel of judges will continue the hearings and the parties’ evidence will be examined. The judge will render a decision and may award remedies in the form of compensatory or punitive damages.

District Court will usually take from six months to a year before rendering a decision in the first instance. The proceedings may take longer when a case involves a foreign party. 

Enforcement of a legal decision

When all appeal venues have been exhausted, a domestic judgment becomes final and enforceable. If the debtor does not comply with the judge decision, the creditor may request the District Court to commend execution by way of attachment and sale of the debtor’s assets through public action.

Indonesia is not part to any treaty concerning reciprocal enforcement of judgments, making it highly difficult to enforce foreign judgments in Indonesia, or to enforce Indonesian court decisions abroad. Because foreign judgements cannot be enforced by Indonesian courts within the territory of Indonesia, foreign cases must therefore be re-litigated in the competent Indonesian courts. In such a case, the foreign court judgment may serve as evidence, but this is subject to certain exceptions as regulated by other Indonesian regulations.


Insolvency proceedings

There are two main procedures for companies who are experiencing financial difficulties:


Suspension of payments proceedings

This procedure is aimed at companies that are facing temporary liquidity problems and are unable to pay their debts, but may be able to do so at some point in the future. It provides debtors with the temporary relief to reorganize and continue their business, and to ultimately satisfy their creditors’ claims. The company continues its business activities under the management of its directors, accompanied by a court-appointed administrator under the supervision of a judge. The company must submit a composition plan for the creditors’ approval and for ratification by the court. The rejection of the plan by the creditors or the court will result in the debtor’s liquidation.



The objective of liquidation is to impose a general attachment over the assets of bankrupt debtors for the purpose of satisfying the claims of their creditors. It can be initiated by either the debtor or its creditors before the Commercial Court. Following the submission of the petition, the court will summon the debtor and its creditors to attend a court hearing. Once bankruptcy has been declared, the directors of the debtor company lose the power to manage the company, which is transferred to the court-appointed receiver who then manage the bankruptcy estate and the settlement of the debts. The debtor’s assets will be sold by way of public auction by the appointed receiver.

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