Aspiring Indonesia: Expanding the Middle Class

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• Over the past 50 years Indonesia has sustained an average annual growth rate of 5.6% in GDP, with strong economic growth and substantial decreases in extreme poverty, which as a result enabled the country to achieve a middle-income status.
• Of those who were poor in 1993, 80% were no longer poor by 2014, substantial progress has been made.
• The middle class has been growing faster than other groups; there are now at least 52 million economically secure Indonesians, or one Indonesian in every five.
• The Indonesian middle class has been a major driver of economic growth as the group’s consumption has grown at 12% annually since 2002 and now represents close to half of all household consumption in Indonesia.
• Expanding the size of the middle-class population is vital to unlocking Indonesia’s development potential and propelling the country to a high-income country status.
• Over the past 20 years, the majority of the poor and vulnerable have climbed out of poverty and into the aspiring middle class, where there are approximately 115 million people who belong in this category.
• The challenge now is for Indonesia to make growth more inclusive by providing economic mobility and growing the middle class – ways to expand Indonesia’s middle-class:
  • Improve the quality of secondary education
  • Achieve universal health coverage to provide citizens with protection from health shocks.
  • Improving tax policy and administration will enable the government to collect more from the growing middle-class and invest in infrastructure which is crucial for productivity.
  • Strengthening local service delivery to enhance the quality of education, health, water & sanitation services that are being provided to citizens.
• There needs to be a reform for a new social contract that binds the state and its increasingly prosperous citizens into a mutually beneficial arrangement. Initiatives by the government to provide higher quality public services in order to create a pathway for upward mobility through better jobs, and economic resilience through stronger social protection and increased tax revenue would be required.