Indonesia’s Demographic Future

Bhayu Purnomo

Bhayu Purnomo Fiscal Policy Agency, Ministry of Finance, Indonesia

Abstract

Some empirical evidence advocates that large population size, especially with a high proportion of working age population, played a significant part in creating economic growth. The typical long-run demographic scenario for an emerging economy like Indonesia is that an increase in the number of working-age persons will lead to an increase in the labor force, thereby boosting potential economic growth. The central objective of this paper is to better understand the challenges of Indonesian future’s population profiles. This paper serves to highlight the fact that policy decisions in Indonesia need to be made with an eye to the longer term. Two questions to be discussed in this paper are what will be Indonesian future demographic profile look like in the future and what types of policies can Indonesia undertake to fully achieve its demographic potential. Several scenarios will be presented later on before the last section that summarizes and provide some policy commentaries. The different scenario results suggest that the Indonesian dependency ratio will reverse in the next 20 years, suggesting a time-limited window for Indonesia to reap the positive condition of the demographic dividend.

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