Airlangga Brings Good News, Indonesia Returns To The Upper Middle Income Country

Coordinating Minister for Economic Affairs, Airlangga Hartarto. (Photo: Doc. Coordinating Ministry for the Economy)

JAKARTA - Indonesia is again included in the ranks of countries with upper middle income. This is reflected in the number of Indonesia's Gross Domestic Product (GDP) which has also been recorded to have exceeded the achievement before the COVID-19 pandemic.

Coordinating Minister for Economic Affairs Airlangga Hartarto said Indonesia's economic growth in 2021 would reach 3.7 percent year on year (yoy). Meanwhile, Indonesia's GDP per capita in 2021 will increase to the equivalent of US$ 4,349 or around Rp. 62.2 million per year. In fact, the GDP in 2019 was only at IDR 59.3 million per capita per year.

"This means that we have returned to the upper middle income country. This achievement is certainly an important foundation for economic recovery," he said in an official statement, Wednesday, February 16.

Furthermore, Airlangga said Indonesia still faces the challenge of the middle-income trap. One solution to get out of this trap is to carry out structural reforms.

"We need to continue to carry out structural reforms so that we can get out of the middle income trap in 2035," he explained.

On the other hand, Airlangga said that Java Island as an industrial base and one of the main contributors to economic growth managed to grow positively by 3.66 percent yoy.

Meanwhile, the highest economic growth was achieved in Maluku and Papua at 10.09 percent yoy. This is in line with the high growth of the mining sector in the two regions as well as the impact of rising commodity prices throughout 2021.

In addition, said Airlangga, the Bali and Nusa Tenggara regions also managed to grow positively by 0.07 percent. Although it is very dependent on the tourism sector which has experienced a decline in performance since the COVID-19 pandemic occurred.

Airlangga explained, the rise in public confidence in consuming goods or services has encouraged the recovery of domestic demand and led to an increase in production as a response from the business world.

Throughout 2021, PMTB (investment) which grew by 3.80 percent has become the highest source of growth in terms of expenditure. Meanwhile, the processing industry, which is the source of the highest growth in terms of production, managed to grow by 3.39 percent yoy.

According to him, Indonesia's economic improvement has been seen from positive growth from the second quarter to the fourth quarter of 2021, although it experienced a slight correction in the third quarter due to the emergence of the delta variant.

"After controlling the delta variant and increasing community economic activity, the Indonesian economy managed to continue positive growth in the fourth quarter of 2021 at 5.02 percent yoy," he said.

According to Airlangga, all components have returned to positive growth at this time. International trade also continued to record impressive performance, supported by the recovery in global demand and rising commodity prices. In the fourth quarter of 2021, export performance increased by 29.83 percent yoy, while imports grew by 29.60 percent yoy.

When viewed from the production side, the five main contributory sectors, namely the manufacturing industry, agriculture, trade, construction, and mining, resumed positive growth and were able to support the Indonesian economy.

In addition, the transportation and warehousing, as well as accommodation and food-beverage sectors, which had contracted in the third quarter of 2021, have managed to rebound with positive growth in the fourth quarter of 2021.

In the health sector, strengthening strategies for controlling the COVID-19 pandemic are also continuously carried out. Acceleration of vaccination through the administration of the third vaccine dose (booster) continues to be increased, so that it will increase public confidence in carrying out economic activities this year.

The former Minister of Industry said that to encourage national economic recovery and the handling of COVID-19, the government budgeted PEN funds of around Rp455.62 trillion. Funds of this size will be focused on three clusters. Among other things, health of IDR 122.5 trillion, public protection of IDR 154.8 trillion, and strengthening of economic recovery of IDR 178.3 trillion.

Airlangga said he was optimistic that this year's economic growth could be above 5 percent.

"The government continues to be optimistic that economic growth can be achieved at 5.2 percent in 2022," he said.