Reading Impactful Economic Growth: Lessons from Global Competition

In a world economy still overshadowed by geopolitical uncertainty, trade fragmentation, and a global growth slowdown, Indonesia has received welcome news. The International Monetary Fund (IMF) projects the Indonesian economy will grow by around 5 percent in 2026. Meanwhile, the OECD estimates growth of around 4.9 percent. This figure places Indonesia as one of the highest-growth countries in the G20, far above most developed nations which are projected to grow in the 1-2 percent range. At the same time, the OECD projects global economic growth will be around just 2.9 percent in 2026. In this context, Indonesia’s achievement demonstrates relatively strong economic resilience amidst an increasingly competitive global environment.

However, the more important question is not whether Indonesia is growing faster than other countries. The more fundamental question is whether that growth truly creates an impact capable of changing the economic structure, increasing productivity, and strengthening public welfare sustainably. The history of world economic development shows that high growth does not always lead to progress. Many countries have enjoyed impressive growth for years but failed to graduate to developed nation status. This is because they did not successfully build a foundation of long-term productivity, innovation, and competitiveness. Conversely, some countries have grown more moderately but managed to generate leaps in welfare because their growth was underpinned by a strong economic transformation. This is the importance of reading the meaning behind growth figures.

The IMF predicts India will remain the highest-growth country among the world’s major economies in 2026, with a rate of around 6.5 percent. However, what makes India interesting is not just that figure. Over the last decade, the country has aggressively built infrastructure, strengthened its manufacturing base, accelerated digitalisation, and attracted the relocation of global supply chains seeking an alternative to China. India’s economic growth is not merely a result of large domestic consumption but also a reflection of increased national production capacity and stronger integration into the global economy.

China offers a different lesson. After decades of enjoying double-digit growth, China’s economy is now projected to grow by around 4.4 percent in 2026. Although lower than its heyday, the country remains a global economic powerhouse because it has successfully shifted its growth base towards high technology, artificial intelligence, electric vehicles, semiconductors, renewable energy, and industrial innovation. The United States presents an even more interesting paradox. With economic growth of around 1.8-2 percent, the country remains the centre of global innovation. The dominance of technology companies, capital market strength, world-class research universities, and an entrepreneurial ecosystem mean that every one percent of American economic growth has a far greater impact on the global economy. The lesson from these three countries is very clear: economic progress is determined not solely by how fast a country grows, but by the quality of the engine driving that growth.

Indonesia has many reasons for optimism. The demographic bonus is ongoing. Macroeconomic stability is relatively well maintained. Investment continues to rise. Natural resource downstreaming has begun to show tangible results. Infrastructure development and digital transformation are also continuing. Yet behind these various achievements, there is considerable homework. The OECD, in its 2026 Foundations for Growth and Competitiveness report, warns that Indonesia’s convergence process towards the high-income country group is beginning to face challenges due to labour productivity growth that is not yet strong enough. In other words, Indonesia’s challenge is no longer just maintaining growth at around 5 percent, but ensuring that this growth is capable of generating greater added value. Indonesian labour productivity still lags behind a number of East Asian countries. Research and development spending is still relatively low compared to countries that have successfully achieved economic transformation. The contribution of the manufacturing sector to gross domestic product has also not fully returned to the position it once achieved during the previous industrialisation period.

In fact, the experience of developed countries shows that productivity is the main foundation for long-term welfare improvement. Nobel laureate in Economics Paul Krugman once stated that productivity isn’t everything, but in the long run it is almost everything. This statement feels increasingly relevant as the world enters the era of the digital economy, artificial intelligence, and intensifying technological competition. Because of this, development success must not be measured solely by gross domestic product growth. What is more important is the extent to which that growth can create better jobs, raise people’s incomes, strengthen the middle class, reduce inequality, and expand economic opportunities.