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Indonesia Needs Minimum 6% Growth to Escape Middle-Income Trap

Arnoldus Kristianus
March 7, 2024 | 3:06 am
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A woman crosses Jalan Thamrin in Central Jakarta on August 13, 2022. (B-Universe Photo)
A woman crosses Jalan Thamrin in Central Jakarta on August 13, 2022. (B-Universe Photo)

Jakarta. Indonesia is setting its sights on an annual economic growth rate of at least 6 percent to elevate itself to the status of a high-income nation, a senior official said on Wednesday.

Amalia Adininggar Widyasanti, the Deputy Minister of National Development Planning in charge of economic affairs, underlined the need for an average annual growth of 6 percent over the next two decades. This ambition aligns with Indonesia's goal to attain developed nation status by its centennial anniversary in 2045.

“To escape the so-called middle-income trap, we need to accelerate economic growth beyond the current 5 percent to 6 percent,” Amalia said during a focus group discussion hosted by the business newspaper Investor Daily in Jakarta.

A key strategy in increasing the percentage of middle-class society involves transitioning "informal" workers from unregulated workplaces to the formal sector. The formal sector, governed by government-sanctioned minimum wages and offering health and social insurance, provides a pathway to economic stability.

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Indonesia presently benefits from a demographic bonus, where the productive age population outnumbers the unproductive age group.

“This provides a very opportune moment for the economy, supported by economic stability, allowing us to initiate accelerated growth,” Amalia said. “To leverage the demographic bonus, we must ensure the creation of quality jobs with income levels that facilitate the ascent to the middle-income class.”

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