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Indonesia must move beyond GDP to assess welfare, equality: Economists
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Valeria Panu, 65, carries a plate of rice for her child in Pong Ruan village, East Manggarai, East Nusa Tenggara. Not all Indonesians can enjoy their country’s above-average growth, with 25 million still living on less than $1 per day as of March this year, Statistics Indonesia (BPS) data show. (JP/Markus Makur)
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ndonesia needs to move beyond the gross domestic product (GDP) as the tool for measuring the nation's prosperity, as the indicator fails when it comes to assessing welfare and inequality, economists have said.
The chairman of the Meeting of Minds Forum, Ismail Serageldin, said the country should not only rely on GDP growth to "fully assess the economy," citing the rise of inequality in several countries from Sweden to Somalia as the main reason that the GDP did not capture the entire economy of a nation.
"The GDP has been growing in Indonesia but it does not measure the welfare of the citizens and inequality in society, among other things," Serageldin told the audience during his presentation at the Meeting of Minds Forum in Jakarta on Dec. 11, adding that the flaws in the GDP "are well-known", as it served as a flow measure rather than stock or wealth measure.
"For instance, a forest standing up is valued at zero, while employing people to cut it down adds a positive number to the GDP. Unremunerated work is also not counted, and thus women's contribution to society is grossly undervalued," he said.
Serageldin, who served as vice president of the World Bank from 1992 to 2000, said many countries relied on the GDP as it was used due to its "shorthand measure" and its correlation with employment. "[But there are still] a lot of things wrong with GDP [as an indicator]."
Indonesia's GDP growth is expected to remain sluggish in 2020 as weakening exports and commodity prices in addition to global uncertainties continue to take their toll on the economy. The country's economy is expected to expand by 5 percent this year and by about the same rate in 2020, according to Singapore-based lender Bank DBS.
Meanwhile, global credit rating agency Moody’s estimates Indonesia’s GDP will expand by only 4.9 percent this year and by 4.7 percent in 2020 — the slowest pace since 2016's fourth quarter — as a result of low commodity prices.
