IMF Ranks Indonesia as 8th Largest Economy, Outperforming France and the United Kingdom

IMF Ranks Indonesia as 8th Largest Economy, Outperforming France and the United Kingdom
IMF Ranks Indonesia as 8th Largest Economy, Outperforming France and the United Kingdom
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In a surprising turn, the International Monetary Fund (IMF) has confirmed that Indonesia ranks as the world’s eighth-largest economy. This ranking is based on GDP adjusted for Purchasing Power Parity (PPP) in 2024. Indonesia reached the eighth spot with a GDP of US$4.66 trillion. In comparison, France and the United Kingdom followed in ninth and tenth places, with GDPs of US$4.36 trillion and US$4.28 trillion respectively.

China remains the global leader with a staggering GDP of US$37.07 trillion. The United States holds second place with US$29.17 trillion, while India comes in third at US$17.36 trillion.

Despite Indonesia’s strong performance, the IMF’s January 2025 World Economic Outlook (WEO) projects a modest global growth of 3.3% for both 2025 and 2026.

This growth rate falls below the historical average of 3.7% observed between 2000 and 2019. The IMF noted that the forecast for 2025 remains largely unchanged from its October 2024 outlook. Upward revisions in the U.S. balanced out downward revisions in other major economies.

Global inflation is also expected to ease. The IMF predicts inflation will drop to 4.2% in 2025 and further to 3.5% in 2026. This decline is anticipated to help advanced economies hit their targets sooner than emerging and developing markets.

“This will help resolve the global disruptions of recent years, including the pandemic and Russia’s invasion of Ukraine, which triggered the biggest inflation surge in four decades,” said IMF Chief Economist Pierre-Olivier Gourinchas on Thursday (Jan 30, 2025).

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However, policy uncertainty is on the rise. Gourinchas warned that many governments elected in 2024 have increased economic policy uncertainty. He added, “Our projections incorporate recent market developments and the effects of increased policy uncertainty in trade, which we assume to be temporary. However, they do not account for potential policy changes currently being debated publicly.”

Gourinchas also pointed to economic developments in the United States. He noted that rising demand paired with shrinking supply could reignite inflationary pressures. Although the short-term impact on economic output is unclear, higher inflation could prevent the Federal Reserve from cutting interest rates. In fact, it might force the Fed to raise rates, which could strengthen the U.S. dollar and widen the external deficit.

“A combination of tighter U.S. monetary policy and a stronger dollar would tighten financial conditions, especially for emerging markets and developing economies. Investors are already anticipating such outcomes, with the U.S. dollar rising about 4% since the November election,” he explained.

This report from IMF not only highlights impressive economic stature of Indonesia but also underscores the challenges ahead in a global environment marked by moderate growth and policy uncertainty.