How Long Will Indonesia’s GDP Per Capita Catch Up with Malaysia’s?
According to data downloaded from the World Bank’s World Development Indicators website, in 2016 Indonesia’s GDP per capita stood at 2011 PPP $10,765, where the “2011PPP” prefix indicates that local currency has been converted into U.S. dollars at 2011 Purchasing Power Parity exchange rates. This placed Indonesia’s GDP per capita at 41.9% of Malaysia’s 2011 PPP $25,699. For Indonesia to catch up with Malaysia in terms of GDP per capita, it will need to grow its economy consistently faster than Malaysia.
Understanding the Forecast
Predicting future growth rates among developing countries is fraught with uncertainty. Countries that are growing faster than their previous trend tend to revert back to that trend. Therefore, the calculations below represent projections of past trends rather than predictions of what will actually happen. The growth rates cannot be forecasted with certainty, as numerous factors can disrupt economic trends nationally and internationally, such as political, military, and religious events.
Recent Growth Comparisons
Over the ten-year period from 2006 to 2016, real GDP per capita in Indonesia grew at an annual rate of 4.2%, while Malaysia grew at 2.9% per year. If these current growth rates were to continue for an indefinite period, Indonesia’s GDP per capita would reach 2011 PPP $25,779 in 2037, overtaking Malaysia’s current GDP per capita. However, Malaysia will also be growing, albeit at a slower rate.
Long-Term Projections
Catching up with Malaysia would take until 2084 when both countries’ GDP per capita would be around 2011 PPP $182,000. However, as we have already seen, the assumption that such linear growth will continue is overly simplistic. Numerous factors, including policy changes, trade agreements, and global economic shifts, can significantly impact these projections.
Key Considerations
The growth of a country’s GDP per capita depends on various economic factors including but not limited to population growth, productivity, investment in infrastructure, education, and innovation. These factors can vary significantly over time and are influenced by both domestic and international policies.
Conclusion
While the potential for Indonesia to catch up with Malaysia in terms of GDP per capita is feasible, it will require consistent and sustained growth that outpaces Malaysia. As always, the future is uncertain, and many factors can derail these projections. However, by focusing on robust policies, investment in human capital, and continued economic and social reforms, Indonesia can build a strong foundation for long-term prosperity.
Remember, the future of both countries is shaped by their current and future efforts, and there is always a path to success if the right strategies are put in place. Let’s explore the potential for growth and the challenges that lie ahead.