March 18, 2021 | Invest Indonesia

Economy Must Grow 6-7% to Escape Middle-Income Trap: Monoarfa

Source from: Antara News

Original News HERE

The Indonesian economy must grow between 6-7 percent for the nation to escape the middle-income trap, Minister of National Development Planning and head of the National Development Planning Agency (Bappenas), Suharso Monoarfa, said.

“Economic growth must average at least 7 percent starting 2022 so that we can escape the middle-income trap,” he said during a working meeting with Commission XI of the House of Representatives (DPR) in Jakarta on Wednesday.

If economic growth averages 6 percent, Indonesia will escape the middle-income trap, with per capita income projected to reach US$12,535 in 2020, he said.

An economic growth of 5 percent in the wake of the COVID-19 pandemic will not be enough for Indonesia to escape the middle-income trap before 2045, he projected. Accordingly, the unemployment rate will not be able to return to the pre-crisis level, he added.

The COVID-19 pandemic has led to a decline in the per capita gross domestic product (GDP), he said. The GDP fell to US$3,927.26 in 2018, moved up to US$4,174.53 in 2019, and then dipped to US$3,911.72 in 2020.

Meanwhile, per capita gross national income (GNI) declined to US$3,810.23 in 2018, then climbed to US$4,047.62 in 2019 before falling to US$3,806.37 in 2020.

Looking at these figures, Indonesia is expected to return to the category of lower-middle income country, the minister remarked.

With the Indonesian economy expected to grow 5 percent after contracting 2.07 percent, the nation will be able to return to upper middle-income country status in 2022, he added.

Indonesia’s 2.07-percent economic contraction is relatively small compared to that in the US (minus 3.5 percent, China (minus 6.1 percent), Mexico (minus 8.3 percent), and the Philippines (minus 9.5 percent), he noted.

The key to higher economic growth is controlling the spread of COVID-19 until the country can achieve herd immunity, he said.

Reporter: Astrid FH/Suharto
Editor: Fardah Assegaf, Ine