Economics & Macro

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Is Indonesia Experiencing Deindustrialization?

Viva Budy Kusnandar 09/08/2022 09:30 WIB

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The contribution of the industrial sector to the national economy has shown a downward trend over the last decade.

Contribution of the Industrial Sector to the National Economy (Quarter I 2013–Quarter II 2022)

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Contribution of the Industrial Sector to the National Economy (Quarter I 2013–Quarter II 2022)

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The industrial sector remains the largest pillar of Indonesia's economy. However, its contribution has shown a downward trend over the last decade, as seen in the graph.

This indicates a phenomenon of deindustrialization, namely a decline in the industrial sector's contribution to the national economy.

Based on data from the Central Statistics Agency (BPS), the Gross Domestic Product (GDP) of the industrial sector at current prices (ADHB) was Rp877.8 trillion in the second quarter of 2022.

Thus, the industrial sector's contribution to the national economy was 17.84% of the total GDP, which amounted to Rp2.82 quadrillion. This contribution is the largest compared to other sectors.

The industrial sector's contribution to the national economy reached 21.57% in the first quarter of 2013, but now stands at only 17.84%. This means the industrial sector's contribution has shrunk by 3.73 percentage points over the last 10 years.

A similar trend occurred in the non-oil and gas processing industry. Over the last 10 years, the contribution of the non-oil and gas processing industry has also decreased by 2.07 percentage points, reaching 16.01% in the second quarter of 2022 compared to the first quarter of 2013.

The industrial sector has also not been able to become a driver of the domestic economy. This is evident from the industrial sector's growth, which remains below national economic growth. In the second quarter of 2022, the national economy grew by 5.44% (year on year/yoy), while the industrial sector grew by only 4.01% (yoy).

To increase the added value of Indonesian exports, President Joko Widodo has implemented a policy to halt the export of several raw commodities, including nickel. Now, several types of commodities must be processed domestically and can only be exported in semi-finished or finished form.

In addition to increasing added value, domestic commodity processing is also expected to boost the national industrial sector and increase job absorption.

Editor : Adi Ahdiat

"Disclosure: This is an AI-generated translation of the original article. We strive for accuracy, but please note that automated translations may contain errors or slight inconsistencies."

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Is Indonesia Experiencing Deindustrialization?

Is Indonesia Experiencing Deindustrialization?

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