Indonesia’s demographic goldmine at risk of going to waste
Despite GDP growth averaging above 5%, productivity has stagnated, and inequality between regions remains stark
JAKARTA, Indonesia (MNTV) – With over 70% of its population in the productive age group, Indonesia is standing before a rare economic opportunity — a demographic dividend that could drive sustained growth for decades.
But economists warn that unless the country tackles deep-rooted productivity and skills challenges, this “golden window” may close before its promise is realized, the Jakarta Globe reported.
At the Investor Daily Summit, economist Talitha Chairunissa of the Indonesian Economists Alliance (AEI) said the nation’s dependency ratio — the number of dependents supported by every 100 working-age citizens — has dropped below 45%, signaling a once-in-a-generation opportunity. “This is a golden window that comes only once in a nation’s history. It must not be wasted,” she said.
Despite GDP growth averaging above 5%, productivity has stagnated, and inequality between regions remains stark. Real wages have increased by just 1.2%, while 80% of new jobs are concentrated in low-income household sectors. Eastern regions such as Papua and Maluku continue to trail far behind Java in development indicators.
Indonesia’s unemployment rate stands at 4.76%, the lowest in 20 years, but over 7 million people remain jobless, and youth unemployment is at 16.16%. The Manpower Ministry estimates that over 10 million Indonesians enter the labor market each year — a strain on job creation despite the favorable demographics.
Investment Minister Rosan Roeslani highlighted a critical gap: workforce skills. About 44% of Indonesia’s 152 million workers have only an elementary education, while just 14% hold diplomas or university degrees. “For investment to flow, investors want to know if the talent is ready. This is a shared responsibility,” he said, urging stronger upskilling initiatives.
Economists also pointed to weak fiscal priorities. Indonesia’s tax-to-GDP ratio, at 10.5–11%, lags behind Thailand (16%), Malaysia (17%), and South Korea (27%). Meanwhile, 37% of the 2026 budget is allocated to populist programs, leaving limited funding for healthcare, education, and infrastructure in underdeveloped regions.
Talitha cautioned that without bold reforms, Indonesia could lose its demographic advantage. “We are growing as a nation,” she said, “but not all citizens are growing with it.”
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