Possible for Indonesia to regain upper-middle income status

Indonesia can return to its upper middle-income status in one to two years, if annual economic growth reaches 5-6 percent and population rises 1.2 percent per year, Presidential Special Staff for Economic Affairs said.

“In the next one-two years, we can return to our position as an upper-middle income country, although there has been an increase in the World Bank’s threshold from gross national income of US$4,046 to US$4,096,” Arif Budimanta said here on Thursday.

As per the World Bank’s latest report in June, 2021, Indonesia is currently in the lower middle-income bracket, he noted.

Indonesia had achieved upper middle-income country status in 2019. However, its status declined after the COVID-19 pandemic struck in early 2020, Budimanta said.

“Saving public health is a priority (currently), and this effort is being carried out by implementing large-scale social restrictions (PSBB) and restrictions on community activities (PPKM), which will reduce community mobility and contract the rate of economic growth,” he noted.

When Indonesia became an upper middle-income country in 2019, its per capita income had reached US$4,050, which was just above the lower threshold of US$4,045 set by the World Bank, he said.

But, when Indonesia’s economy contracted due to the impact of COVID-19, the nation’s per capita income fell to US$3,870, Budimanta added.

As a result, Indonesia returned to the category of lower middle-income countries, he said.

“Besides Indonesia, several countries have dropped from upper middle-income to lower middle-income status, for example, Belize, Samoa, and Iran,” he said.

Iran has recorded a sharp decline in per capita income from US$5,240 to US$2,870, he added.

“There are also several countries that have dropped in rank from high-income countries to upper-middle-income countries, such as Mauritius, Panama, Romania,” he pointed out.