Why is Indonesia growing so slowly? The very question seems absurd. A huge exporter of coal, liquefied natural gas and palm oil, Indonesia’s economy continues to rattle along at 6 per cent. Driven in large part by domestic demand, it is reckoned to be among the most resilient economies to external shock. Its finances look rock solid too. With near-balanced budgets, low inflation and a debt-to-gross domestic product ratio of 25 per cent, it is enough to turn a Greek statistician honest.
What is more, the future looks brighter still. Of south-east Asian economies, Indonesia is the only one the Organisation for Economic Co-operation and Development expects to grow faster in the next five years – at an annual 6.6 per cent – than it did in the last. Its seemingly inexorable expansion is being propelled by favourable demographics, a potent force in a country of 240m people. At this rate, Standard Chartered Bank expects it to be the sixth-biggest economy in the world by 2030, bigger than either Germany or the UK, and bested only by China, the US, India, Brazil and Japan.
Yet Indonesia is falling far short of its potential. Economically, it is in a deliciously sweet spot. Why, then, in 2010 did it grow more slowly than the Philippines, often considered to be Asia’s economic equivalent of the mad lady in the attic?