JAKARTA – Indonesia emerges as one of the world’s 20 largest economies, with a GDP of about USD 1.396 trillion in 2024 and a GDP-per-capita of approximately USD 4,958. Its population of 283.5 million people in 2024 underscores the scale of both opportunity and imperative.

Growth is steady: after rebounding from the pandemic, real GDP growth has hovered near 5 %—for instance, the estimate of ~5.0 % growth for 2023 and continued momentum into 2024.

Several features drive this momentum:

• A young and growing population, with more than half under 30 years of age, providing a demographic dividend.
• A concerted government push to move beyond raw-material exports toward higher-value manufacturing and processing (“down-streaming”).
• A large domestic market with rising consumption and modernising services, enabling diversification away from purely commodity-based growth.

Key Industries Behind the Rise

The German trade and investment agency GTAI identifies promising sectors for foreign firms, including those from Germany. Among the standout industries:

• Electronics & electrical engineering: Indonesia is keen to deepen its manufacturing of intermediate goods not just raw extraction.
• Automotive / e-mobility / battery supply-chain: Indonesia’s mineral wealth (nickel, tin) makes it a pivotal player for batteries and energy storage.
• Renewable energy and storage systems: As Indonesia aims to upgrade its energy infrastructure, German firms with expertise in energy-storage, grid integration and system solutions can benefit.
• Vocational training and workforce development: The recent high-level visit by Association of German Chambers of Commerce and Industry (DIHK) delegation to Jakarta emphasised German-Indonesian cooperation in dual vocational training and up-skilling of the workforce.

For German enterprises, the inter-linkage is strong: Germany’s technology footprint (machinery, automation, electrification) aligns well with Indonesia’s industrial ambitions and the interface provided by AHK Indonesia/EKONID facilitates market entry.

 

Social & Environmental Risks

However, underlying Indonesia’s rise are notable structural risks:

• The manufacturing share of GDP has declined (from ~27 % in 1997 to about 18 % in 2022), suggesting challenges in moving up the value chain.
• Despite demographic advantages, the quality of education and skilled workforce remain relative weak spots, hampering more advanced industrialisation.
• The economy remains commodity-dependent; extraction of minerals remains key, and value-added downstream processing is still limited.
• Environmental concerns—such as deforestation, mining impacts, biodiversity and climate change—pose reputational, regulatory and operational risks for investors. (Referenced in IW-Report)
• Social inequalities and informal labour markets remain large: the informal employment share was nearly 60 % of total employment in 2022.

Strategic Outlook & German-Indonesian Cooperation

For Germany and German firms, Indonesia offers multiple strategic entry points:

• Leveraging German mechanical engineering, automation, energy-storage and e-mobility technologies to support Indonesia’s ambition to upgrade its industrial and energy sectors.
• Aligning vocational training and workforce up-skilling programmes (via AHK/EKONID and DIHK cooperation) to close the skills gap in Indonesia and build local capacity.
• Collaborating in sustainable development and value-chain localisation (e.g., battery production) where Indonesia seeks to move beyond raw exports.
• Participating in infrastructure, renewable energy and environmental technology exports, supported by Germany’s bilateral development and investment frameworks.

The German-Indonesian economic partnership is already being reinforced: the June 2025 DIHK delegation to Jakarta underscored MoUs around trade, investment, vocational training and sustainable investment.

Summary

Indonesia stands at a critical inflection point: with GDP near USD 1.4 trillion, young demographics, and a pivot toward industrialisation and value-added growth, the country has the potential to become a major global economic actor. Yet the path is neither smooth nor automatic. For German (and other international) enterprises, the opportunity is clear—but it must be matched by concerted engagement in technology, training, sustainability and partnership. In this evolving landscape, Indonesia may well emerge as a strategic hub not just for Southeast Asia, but for global supply-chains—provided structural and environmental risks are managed. (zai)

Sources: GTAI, AHK, Institut der deutschen Wirtschaft (IW)