Nouriel Roubini's Global EconoMonitor

Nouriel: Indonesia Still a Compelling EM Story

In Indonesia to speak at the NYSE, Nouriel noted Indonesia’s continuing strong performance among emerging markets.

In the two years since Nouriel loudly advocated Indonesia’s status as a major EM, Russia has indeed suffered numerous macro and political setbacks, while Indonesia has continued a process of solid fiscal and macro policy, for laudable growth.

The prior paper referenced can be read here, in which Nouriel challenges the notion “that the BRIC countries – Brazil, Russia, India and China – will increasingly call the economic tune in years to come.” Excerpts below:

Set the vital statistics of the BRIC economies side by side and it becomes painfully obvious that, in the words of the old Sesame Street game, “One of these things is not like the other.”

The weakness of the Russian economy and its highly leveraged banks and corporations, in particular, which was masked in recent years by the windfall brought by spiking oil and gas prices, burst into full view as the global economy tumbled.

Perhaps the most compelling case of all is that of Indonesia, the world’s largest Muslim state, with a rapidly expanding middle class, relatively stable democratic politics, and an economy that has been a star performer in Asia despite the global recession. From an U.S. perspective, Indonesia is an attractive alternative to Russia, which recently has vied with Venezuela for leadership of the “America in decline” cheering section.

Indonesia, moreover, has shown resilience not only economically, but also as a nation. In spite of its diverse ethnic makeup and far-flung island territory, the country has made a quick transition from military dictatorship and has recovered from myriad challenges and setbacks, including the 1997 Asian financial crisis, the tsunami in 2004, the emergence of radical Islam and domestic unrest. While Indonesia’s per capita GDP remains low, it is a country’s potential that matters in economic affairs, and here Indonesia shines.

Indonesia depends less on exports than its Asian peers (let alone Russia), and its asset markets (timber, palm oil, and coal, in particular) have attracted major foreign investment. The government in Jakarta, meanwhile, has taken a strong stand against corruption and moved to address structural problems. Even demographic trends favour Indonesia, which, with 230 million people, is already the fourth-largest country in the world by population – a full Germany (80-plus million) larger than Russia.

5 Responses to “Nouriel: Indonesia Still a Compelling EM Story”

ThomasGrennesSeptember 24th, 2012 at 11:17 pm

Indonesia is a country with great economic potential that has begun to realize its potential.
Indonesia was one of the three Asian countries to continue to grow in spite of the Global Financial Crisis. Indonesia has been compared with other countries, such as Australia and Argentina that had great potential. Eminent Indonesian economist, Dr. Thee Kian Wie, has asked whether Indonesia will follow the success of neighboring Australia or stumble and follow the failure of Australia.

ThomasGrennesSeptember 24th, 2012 at 11:29 pm

Correction: There is an unfortunate typo in the previous comment. It should end: "the failure of Argentina".

Stefan SteinfeldSeptember 26th, 2012 at 5:54 am

Indonesia's recent boom is predominantly based on resources and driven by greed – if not for that, nobody would bother with a place which is so corrupt, has such inadequate infrastructure, economic feudalism, huge income and wealth disparities and a huge pool of uneducated people with a bad attitude to work.

omnitech suportAugust 13th, 2013 at 10:15 am

I really agree to what author said about the political stability in the Indonesia. In addition, the middle class people in Indonesia are getting much attraction to the changes in the politics and market of the nation. This thing is actually very good thing for a quickly developing country.