Indonesia needs export focus for 7% economic growth, economist says

To achieve robust economic growth of 7 to 8 percent, Indonesia must pivot its economic strategy towards an export-oriented, or "outward-looking," approach, according to economist Didik J. Rachbini. He argues that the government's current policies, which heavily emphasize the domestic market, import substitution, resource control, and internal consumption, have resulted in only moderate growth, hovering around 5 percent.

Rachbini, affiliated with the Institute for Development of Economics and Finance (Indef), believes that exports have not yet become a powerful enough engine to drive significant industrial transformation. While Indonesia's large population supports a substantial domestic market, he contends it is inadequate for fostering world-class industrialization. An outward-looking policy, he explains, is crucial for enabling Indonesian businesses to compete globally, thereby generating substantial foreign exchange earnings and elevating their capabilities.

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Only the domestic sector is being packaged with various policies, yet the result is that the economy continues to grow only moderately, at around 5 percent.

Such a policy shift, Rachbini suggests, would also attract foreign investment through robust incentive systems, infrastructure support, and bureaucratic efficiency. This, in turn, would stimulate domestic investment as the industrial sector flourishes. He points to the 1980s, when Indonesia implemented a similar export-oriented strategy, achieving growth rates of 7 to 8 percent.

Furthermore, Rachbini cautions against relying on government spending as a primary driver for high economic growth, deeming it unsustainable and merely a short-term cushion, especially given current fiscal constraints. He also notes that household consumption can no longer be depended upon, as the middle class has diminished, hindering growth from this side. The government recently reported 5.29 percent economic growth in the second quarter of 2026, a slight slowdown from the first quarter's 5.61 percent, though still maintaining growth above 5 percent for seven consecutive years.

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This is where an outward-looking policy becomes vital; it can enable Indonesia to establish a presence in global competition, with the hope of generating substantial foreign exchange earnings.