After MSCI, IMD Now Downgrades Indonesia's Global Competitiveness

Negative sentiment continues to mount for Indonesia’s investment and business climate. Following MSCI’s threat to downgrade the Indonesian market from emerging market to frontier market status, the country’s global competitiveness has now fallen further. Indonesia’s position in the global competitiveness ranking has weakened again. Based on the IMD World Competitiveness Ranking 2026, Indonesia is ranked 58th out of 70 countries and economies assessed. This position is down from the previous year’s ranking of 40th. Compared to 2024, the decline is even steeper, dropping 31 places from 27th to 58th. The data comes from the IMD World Competitiveness Yearbook 2026, published in June 2026 by the IMD World Competitiveness Center in Switzerland. Amid increasingly fierce global competition, Singapore once again claimed the top spot, followed by Hong Kong, Switzerland, Taiwan, and the United Arab Emirates. Within Southeast Asia, Indonesia trails Malaysia (15th), Vietnam (27th), and Thailand (45th). The IMD report indicates that the decline in Indonesia’s competitiveness was primarily influenced by weakening business efficiency and infrastructure quality. In the Business Efficiency factor, Indonesia ranked 38th globally, down from 23rd in 2024. Meanwhile, the Infrastructure factor fell to 58th from 52nd previously. Government performance also experienced a sharp decline. The Government Efficiency factor slumped from 14th in 2024 to 50th in 2026. On the other hand, the Economic Performance factor remained relatively stable at 24th globally. At a more detailed level, several Indonesian indicators remain in the lower tier among the 70 countries assessed. These include productivity and efficiency (53rd), finance (51st), management practices (55th), attitudes and work values (53rd), and education (63rd). Furthermore, the quality of scientific and technological infrastructure remains a challenge, with scientific infrastructure ranked 48th and technological infrastructure ranked 47th. Despite the overall ranking decline, Indonesia still possesses several competitive indicators, including prices (10th), taxation (12th), the labour market (21st), and the domestic economy (24th). In its country profile, IMD identified key challenges for Indonesia’s competitiveness in 2026, including the threat of global economic confrontation to national energy security, relatively stagnant economic growth, adjustments to government budget allocations, limitations in infrastructure and human resource competencies, and limited sources of financing. Arturo Bris, Director of the IMD World Competitiveness Center, assessed that economic competitiveness is no longer solely determined by production costs, market size, or innovation. ‘Economic competitiveness in 2026 is no longer primarily a contest of cost, economies of scale, or even innovation. Competitiveness is now a contest of institutional credibility,’ Bris stated. According to him, in an increasingly fragmented world, legal certainty, enforceable government commitments, and the capacity of state institutions are the main factors determining competitiveness. Bris added that a country does not become competitive by having more regulations, but when economic actors believe that contracts are enforced, public decisions can be reviewed, corruption is curbed, and administrative authority is exercised transparently. The IMD World Competitiveness Ranking 2026 measures the competitiveness of 70 countries and economies using 341 indicators. The assessment is divided into four main factors: Economic Performance, Government Efficiency, Business Efficiency, and Infrastructure. These four factors are further broken down into 20 sub-factors, each weighted at 5% of the final score. Two-thirds of the assessment comes from statistical data collected from various international, national, and regional sources, while the remaining third comes from an Executive Opinion Survey measuring business actors’ perceptions of each country’s competitiveness. In 2026, IMD received over 6,900 survey responses from 70 countries and economies. For Indonesia, data collection was conducted jointly with the Management Institute of the Faculty of Economics and Business, University of Indonesia, and NuPMK Consulting. Overall, the IMD report shows that Indonesia’s main challenge no longer lies in macroeconomic stability. Improving institutional quality, business efficiency, infrastructure development, and human resource quality are crucial factors for strengthening Indonesia’s long-term competitiveness.