JAKARTA: Indonesia could overtake Britain to become the world’s seventh largest economy by 2030 – if it raises its growth rate to take advantage of a rapidly expanding consumer class, the McKinsey Global Institute said today.
The institute, linked to management consultant McKinsey & Co, said Indonesia’s young population, ongoing urbanisation and growing middle class incomes favoured its growth prospects.
By 2030, Indonesia will add 90 million new consumers, with a services sector worth US$1.1 trillion.
But to meet its economic potential, Indonesia would have to overcome the chronic protectionism, over-regulation and poor transport infrastructure that hold back economic growth, it said. Critics cite corruption as another major impediment to growth.
Indonesia has sustained GDP growth over 5% per year but it had to grow at 6% annually to achieve the target the report said was possible.
The economy grew at a stronger-than-expected 6.4% last quarter, defying a global downturn, in part because of domestic consumption by the expanding middle class and also investment.
Indonesia, a secular state, is the world’s fourth biggest by population and has the world’s 16th largest economy. It is the biggest economy in Southeast Asia and in December and January was awarded investment grade debt status by two ratings agencies.
President Susilo Bambang Yudhoyono last year outlined a plan to make Indonesia into a top 10 global economy by 2025.
The institute said Indonesia would need a more skilled workforce to meet the growth target.
“We will need to add 60 million skilled and semi-skilled workers over the next two decades. This is a big number. We need to get the number in addition to the quality of workers,” Arief Budiman, president-director of PT McKinsey Indonesia told Reuters.