Goldman Sachs has released a global economic report in which they predict Indonesia will become the world's fourth largest economy in US dollar terms by 2050, pushing aside developed markets such as Germany (currently 3rd), the UK (5th) and France (6th) and ahead of other major emerging economies such as Russia (8th place) and Brazil (10th place).
Many readers of the Goldman Sachs report are surprised by Indonesia's emergence as a global economic powerhouse, but they shouldn't be.
1. Advanced economies have been decelerating over the past decade, while Indonesia has outperformed economic forecasts over the past two decades!
2. Indonesia is still in the 'sweet spot' of its demographic transition, with 70% of its population currently in prime working age.
3. Indonesia is incredibly blessed with natural resources and is the largest producer of many commodities mined or grown from within its own land, including green metals such as nickel and cobalt, which are needed in the EV industry.
4. Indonesia's digital economy has increased tenfold since 2015. It is expected to continue to grow over the next two decades, especially with the growth of Indonesia's middle class. Digital platforms enable wider access to goods, education, healthcare, financial services, media and many other services to the growing middle class across Indonesia.
5. However, there are several important factors critical to Indonesia's economic growth: (I) institutional quality; (II) openness to trade and foreign direct investment; (III) education and productive employment; (IV) macrostability; and (V) infrastructure quality.
6. President Joko Widodo's government has made great strides in developing infrastructure, promoting trade and attracting foreign investment, and even though Indonesia is only halfway there today, the good news is that it is moving in the right direction!
Sources: 1. Goldman Sachs report: https://www.goldmansachs.com/intelligence/pages/the-global-economy-in-2075-growth-slows-as-asia-rises.html
and a selection of articles on:
2. Bloomberg: https://www.bloomberg.com/news/articles/2022-12-06/what-does-world-economy-look-like-through-2075-here-s-what-goldman-sachs-thinks
3. CNBC: https://www.cnbc.com/2023/07/10/india-to-become-worlds-second-largest-economy-by-2075-goldman-sachs.html
4. The Economic Times: https://m.economictimes.com/news/economy/indicators/india-will-become-2nd-largest-economy-by-2075-overtaking-us-goldman-sachs/videoshow/101677042.cms
5. Forbes: https://www.forbes.com/sites/dereksaul/2022/12/06/china-and-india-will-overtake-us-economically-by-2075-goldman-sachs-economists-say/amp/
6. The South China Morning Post: https://www.scmp.com/news/asia/article/3227246/move-over-america-china-and-india-will-have-bigger-economies-2075-goldman-sachs-says
