Revisiting Indonesia’s Sources of Economic Growth and Its Projection Towards 2030

This paper revisits Indonesia’s sources of economic growth using the Growth Accounting Framework with education adjusted employment for period 1971-2007. The study estimates contribution of growth in capital stock, human capital and Total Factor Productivity (TFP) during the period before and after the crisis. TFP played positive but minor role in Indonesia’s economic growth before the crisis. Growth in capital stock had been the main driver, attributing between 50-70% of growth. Growth in human capital accounted for another 30%. The pattern of sources of growth has changed substantially post crisis. TFP growth has played a more significant role, whereas capital stock growth has been increasing but at a meager pace. Human capital has consistently contributed about 30% to the overall growth. The roles of capital stock growth, human capital growth and TFP have been on a more equal footing after post-crisis. If this trend persists, it will have profound implication on the driver of Indonesian economy’s growth in the future and its trajectory projection towards 2030.




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