Indonesia set to overtake Russia in global economic rankings by 2026
- Web Desk
- Sep 01, 2023
WASHINGTON: Indonesia is poised to surpass Russia and claim the title of the world’s sixth-largest economy by year 2026, measured in terms of Purchasing Power Parity (PPP), as reported by Atlantic Council.
As per the report, the shift is expected to occur about two years earlier than originally predicted, considering the timeline before Putin’s actions in Ukraine. This calculation is based on a comparison of International Monetary Fund (IMF) growth forecasts before and after the event.
However, this narrative is more than just about sanctions. While financial sanctions and limited technology access due to export controls have clear adverse impacts on the Russian economy, the common factor driving Russia’s decline and Indonesia’s rise is “people”.
The reports said that Russia is grappling with a significant brain drain, whereas Indonesia’s labour force is on a growth trajectory. Notably, Indonesia’s educated professional segment is expanding, in contrast to Russia’s shrinking counterpart. This demographic contrast highlights the impending switch in the world’s major economies, signaling a shift in economic influence.
Meanwhile, Russia’s labor landscape witnesses a concerning trend, as citizens under 35 constitute less than 30 per cent of the workforce, a record low since data collection began two decades ago. Startling figures reveal that between the start of the invasion and spring 2023, a staggering 86 per cent of Russian emigrants are aged below 45, and 80 per cent possess college education.
Furthermore, according to the report, as Russia becomes less appealing to potential migrants and living conditions become similar to those in former Soviet republics, which has been Moscow’s primary source of migration, its workforce is expected to decrease. Alongside decreasing birth rates, this might potentially reduce Gross Domestic Product (GDP) growth by around 0.5 per cent by 2040, as projected by Bloomberg Economics and similar sources.
On the other hand, Indonesia experiences a mushrooming labour force, strong export of goods, and ongoing construction of a new capital. Xi Jinping’s efforts to involve Indonesia in the BRICS expansion underscores his strategic understanding of the unfolding economic landscape, pointing towards the south of China.
Meanwhile, amid Russia’s aging workforce and declining education standards, Indonesia continues to enhance its labour pool with skilled and educated contestants, although at a slightly slower pace than the two decades preceding COVID-19. The expanding and prosperous labour force forms a solid base for increased private consumption in Indonesia. This aspect is particularly noteworthy for China, as it seeks new consumer markets for its exports.
Although Russia serves as an essential export market for the moment, China’s long-term growth prospects appear stagnant or potentially negative, while the opposite holds true for Indonesia. The nation is on track to fulfill its goal of achieving High-Income Country status by 2045.
Indonesia’s vision of a brighter economic future underscores its reluctance to participate in the BRICS expansion—a significant yet overlooked development last week, reflecting its growing self-assuredness.
Reports suggest that Russia might rely more on countries like China to strengthen its economy, while countries like Indonesia will have plenty of potential partners for business in the region.