Indonesia Categorized as Lower Middle-Income Country: World Bank

JAKARTA, KOMPAS.com - Indonesia is now classified by the World Bank as a lower-middle income country, a downgrade from its previous category as one of the upper-middle income countries based on gross national income (GNI) per capita in 2020.

In the report, which is updated every July 1, Indonesia's per capita income last year reached $3,870, or down 4.44 percent from $4,050 in 2019.

In response to this, the Ministry of Finance said that the decline in Indonesia's per capita income was impacted by the Covid-19 pandemic.

Head of the Fiscal Policy Agency at the Ministry of Finance, Febrio Kacaribu, said that the Covid-19 pandemic was a big challenge and had a profound impact on social life and global economic activity.

Also read: World Bank Raises Indonesia’s Status to Upper-Middle-Income Nation

"The pandemic has created negative economic growth in almost all countries, including Indonesia, in 2020. Thus, the decline in Indonesia's per capita income is an unavoidable consequence," Febrio said in a statement, Thursday, July 8.

Febrio explained Indonesia's economic growth contracted by 2.1 percent in 2020. However, the realization was much better than other G-20 economies and ASEAN members states.

Citing examples, in 2020 India's growth contracted 8.0 percent, South Africa's economy contracted by 7.0 percent, while the Philippines and Malaysia contracted by 9.5 percent and 5.6 percent, respectively. 

Only a few countries still grew positively last year. China's economy stood at 2.3 percent, Turkey at 1.8 percent, and Vietnam at 2.9 percent.

He said prior to the pandemic, Indonesia was in a strong trend in economic growth and prosperity. This is driven by hard work in carrying out development to obtain relatively high economic growth consistently averaging 5.4 percent in the last few years.

Also read: Indonesian Minister of Finance Suggests 1 Million Daily Vaccinations to Jumpstart Economy

This achievement has brought Indonesia into the category of the upper-middle income country with per capita income reaching $4,050 in 2019, slightly above the minimum threshold of $4,046.

The World Bank estimates the minimum threshold for a country to become an upper-middle income country this year has risen to $4,096.

"The relatively moderate contraction of Indonesia's economic growth in 2020 was supported by the strong state budget and accommodative fiscal policies," Febrio added.

However, the achievement of Indonesia's per capita income level before the pandemic was forced to return to the World Bank's lower-middle income country status.

In general, there are four economical categories of countries, namely low-income, lower-middle, high-middle and high-income countries. Every year, the indicators of the classification will change and affect the ranking or category of each country.

(Writers: Yohana Artha Uly, Mutia Fauzia | Editors: Erlangga Djumena, Mutia Fauzia)

Sources:https://money.kompas.com/read/2021/07/08/123700826/indonesia-turun-kelas-jadi-negara-berpenghasilan-menengah-ke-bawah-ini-kata

https://money.kompas.com/read/2021/07/07/210847026/indonesia-turun-kelas-jadi-negara-berpenghasilan-menengah-ke-bawah