In 2023, the Indonesian economy demonstrated remarkable resilience amidst global uncertainties stemming from the pandemic’s aftermath and geopolitical disruptions in energy and food markets. With economic growth reaching 5.05%, Indonesia maintained a robust economic trajectory, driven by strong domestic demand in key sectors such as wholesale and retail, transportation, tourism, and communications. Government efforts to stabilize prices and safeguard consumer welfare led to significant declines in both headline and core inflation rates.

The 11^th edition of our analysis examines the competitiveness of the 34 sub-national Indonesian economies. Most provinces retained their rankings from the previous year, with East Kalimantan being a notable exception, climbing to the third position. This upward movement indicates a favorable socio-economic trajectory for East Kalimantan, especially considering its status as Indonesia’s prospective new capital. The disparity between the western and eastern provinces persisted, with Java’s provinces dominating the top 10 positions in the overall rankings, while the bottom five positions remained largely occupied by the eastern provinces. This divide is particularly conspicuous in the Government and Institutional Settings domain, where the disparity between the highest and lowest performers is starkly evident.

Thematic research for this edition focuses on the efforts to bridge the digital divide to foster an inclusive digital economy. Indonesia’s digital economy is poised to become one of the fastest-growing and largest in the ASEAN region, with significant increases in Gross Merchandise Value (GMV) anticipated over the next two years, particularly in e-commerce and food delivery platforms. However, disparities in digital access and usage remain, with remote regions like Papua experiencing lower levels of access and utilization.

Enhancing digital skills and literacy is crucial for bridging this digital divide. Despite government initiatives to bridge the digital divide, challenges remain, including disparities in digital literacy, access, and usage across different regions and socio-economic groups. These challenges arise from a lack of digital skills and innovation within the workforce, variations in internet access pricing, under-utilization of digital services, and insufficient data security awareness.

The study concludes with several policy recommendations to promote digital inclusion, such as integrating digital skills into school curriculums, improving financial literacy to combat online scams, and creating a safe and affordable digital environment.

By NG, Wee Yang