Saturday, August 6, 2011

Indonesia to Enter The Golden Moment

Author's Note 
This is a re-formatted article. The original article is:
Achieving Indonesia’s golden moment of economic growth
published by The Jakarta Post
on 7 August 2011
by Kiki Verico

Background
In the article, golden moment (of economic growth) referred to a period of time when a country's real economic growth is higher than its inflation rate.

World Development Indicator (WDI) data shows that the more developed countries experienced golden moment:
  • USA: about 6 years (1960-1966)
  • Japan: about 10 years (1960-1970)
  • South Korea: about 8 years (1982-1990)
Statistics
Statistics of Indonesia's Real Economic Growth and Inflation in selected period is as follow:

Period
Real Economic Growth
Inflation
1965 - 1970
5.40%
284%
1995 - 2000
13%
58%
2000 - 2005
4.80%
8.40%

Event in:
  • 1965 - 1970: Transition From Old Order to New Order. 
  • 1995 - 2000: Global Financial Crisis and Transition from New Order to Reform Era
  • 2000 - 2005: Post Global Financial Crisis
In graphical presentation:

Picture 1. Real Economic Growth vs. Inflation

Based on the summary above, Indonesia has never experienced it since its independence day on 1945 (inflation was always higher than real economic growth). To achieve golden moment, Indonesia needs to preserve, in average, about 8% real economic growth rate and 4% inflation rate for 10 years continuously.

Forecast
If the general election in 2014 goes smoothly, Indonesia will have an opportunity to achieve golden moment between 2016 and 2026 when (it is expected that) income per capita is shifting from middle to high-income earning country (more than USD 10,000 per capita per year).

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