Economist: Key to Achieving Income Target Lies in Fixing Economic Structure

Jakarta - Yusuf Rendy Manilet, an economist at the Center of Reform on Economics (Core), stated that the key to achieving the average income target is to improve the economic structure. “The key is not chasing short-term figures, but rather fixing the economic structure,” he said in Jakarta on Tuesday. Under the 2027 State Budget (APBN) target, the government is aiming for an average monthly income of Rp8 million per Indonesian. This target is an increase from the 2026 figure of Rp7.72 million per month. According to Yusuf, this target should be read as a directional indicator for development, not as a depiction that every individual will earn Rp8 million per month. The draft state budget document still targets a Gini ratio in the range of 0.362 to 0.367, with the share of formal workers only around 40 percent. This means the majority of the workforce is still in the informal sector with relatively low productivity and wage levels. In such conditions, he continued, an increase in Gross National Income (GNI) is not necessarily felt directly by most households. From a realisation perspective, the target is also quite ambitious, considering that GNI is calculated in US dollars, while the exchange rate assumption for 2027 is in the range of Rp16,800 to Rp17,500 per US dollar. The weakening of the rupiah means that an increase in income in rupiah terms is not fully reflected in dollar-based GNI. At the same time, the global economy is still overshadowed by a trade slowdown and commodity prices that are no longer as high as in previous years. Several economists even assess that the 2026 GNI target is at risk of not being achieved, meaning the 2027 target requires higher and more consistent economic growth compared to recent achievements of around 5 percent. Therefore, structural economic improvements are necessary, considering Indonesia is still facing symptoms of premature deindustrialisation, where the manufacturing sector’s contribution to GDP has fallen to around 18 to 19 percent before the country has reached high-income status. “The experience of many countries shows that high-value-added manufacturing is the most effective sector for creating formal employment, increasing productivity, and driving sustainable wage increases,” he said. “That is why reindustrialisation is the most important agenda. Downstreaming must be directed to generate domestic value addition, not just exporting semi-finished goods. At the same time, improving workforce quality, expanding formal employment, strengthening value-added exports, and ensuring investment climate certainty must go hand in hand so that economic growth is truly of high quality,” Yusuf explained.