Indonesia is anticipated to overtake Russia as the world's sixth largest economy by 2026: How?
Indonesia is anticipated to overtake Russia as the world's sixth largest economy (in PPP values) in 2026, about two years earlier than if Putin's invasion of Ukraine had never occurred.
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This is not a tale about sanctions. Yes, financial sanctions and a lack of access to innovative technologies as a result of export bans have long-term negative consequences on the Russian economy.
Workforce served as significant in both nations
However, both Russia's decline and Indonesia's rise are driven in large part by the same factor: people. Russia is experiencing severe brain drain, whilst Indonesia's labour force is expanding.
Indonesia's educated professional class is expanding, whereas Russia's is decreasing. That disparity is what makes their upcoming exchange on the list of the world's greatest economies noteworthy. The world's economic centre of gravity is changing.
86 percent of Russian emigrants are under the age of 45 and Well-educated
Working individuals under the age of 35 currently account for fewer than 30% of the Russian labour force, the lowest share since Russia began collecting such data twenty years ago. And here's a frightening number for all Russian policymakers: from the beginning of the invasion through the spring of 2023, 86 percent of Russian emigrants are under the age of 45, with 80 percent having a college education.
Russia's labour supply will diminish in the coming years as potential migrants perceive the country less favourably and as its living standards converge with those of other former Soviet countries, Moscow's traditional source of migration. This, along with dropping birth rates, implies that by 2040, a diminishing workforce could decrease GDP growth by as much as 0.5 percent, according to Bloomberg Economics calculations.
Indonesia's Exports are on rise
Meanwhile, Indonesia's labour force is expanding, commodity exports are increasing, and a new capital is being built. There is a reason why Xi Jinping apparently worked so hard this week to draw Indonesia into the BRICS expansion. He is fully aware of where the future is heading: south, rather than north.
While Russia's workforce ages and education levels decline, Indonesia's workforce continues to develop as new employees with strong educational backgrounds and key skills enter the labour force, albeit at a slower rate than in the two decades preceding COVID. A larger and more prosperous labour force has also laid the groundwork for increased Indonesian private consumption.
This is especially significant for China, which is looking for new consumer markets to consume its goods. Although Russia may be a significant export market for Chinese exporters for the time being, as it hurries to fill the gaps left by the withdrawal of Western enterprises, its long-term growth prospects remain sluggish at best, and most certainly negative.
The opposite is true for Indonesia, which remains on track to meet its target of becoming a High-Income Country by 2045.
Indonesia refusal to join BRICS
Indonesia sees a stronger economic future ahead, and its refusal to join the BRICS expansion so far reflects its rising confidence—and was one of the most crucial and ignored developments last week.
According to the research, Russia will increasingly rely on benefactors such as China to support its economy, but developing countries such as Indonesia will have many more allies keen to do business across the islands.
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