JakartaPost-Sept 24, 2024
The World Bank has thrown cold water on Indonesia’s dream of becoming a high-income economy by 2045 and outlined some of the challenges middle-income countries face in making such a leap. According to government planning, achieving that target in time for Indonesia’s centenary of Independence would require annual gross domestic product growth of 6 to 7 percent over the next 20 years. “For middle-income countries to have high income in decades rather than centuries, it would need a miracle,” World Bank Group chief economist Indermit Gill said on Monday at a seminar held at the Finance Ministry’s Dhanapala Building in Jakarta titled ASEAN Economic Development and the Middle-Income Trap. While acknowledging the country’s strong economic growth, Gill pointed out that the road ahead would be tougher for Southeast Asia’s biggest economy. Since the 1970s, per-capita income in many middle-income countries has stagnated at a fraction of the United States level, according to the World Bank’s World Development Report 2024 titled Middle Income Trap that was published last month. The report found “that as countries grow wealthier, they usually hit a ‘trap’ at about 10 percent of annual US GDP per person – the equivalent of US$8,000 today.” Of the relatively small number of countries that have managed to achieve high-income status since 1990, more than a third were either beneficiaries of integration into the European Union or of previously undiscovered oil. Currently, 108 economies that are home to three-quarters of the global population fall into the middle-income category with per-capita income ranging from $1,136 to $13,845, and they face serious challenges in their efforts to become high-income countries, the report states, such as aging populations, trade fragmentation, environmental crises and rising government debt. While acknowledging Indonesia’s intention to support its public sector, Gill said the country did not perform well in regulatory and operational efficiency. “It’s not that Indonesia isn’t heading toward the right direction, but the pace of reform is stalling compared to countries that have managed this transition successfully,” he noted, adding that the country’s growth pace lags that achieved in the past by China and South Korea. Read more at: https://www.thejakartapost.com/business/2024/09/24/miracle-needed-for-ri-to-become-advanced-economy-by-2045-world-bank.html
