Macro-Demographics and Ageing in Emerging Asia: the Case of Indonesia

Abstract

In common with a number of other emerging economies in South East Asia, Indonesia is confronting rapid demographic transition at a low level of per capita income. The fourth largest country in the world by population size, Indonesia will face new challenges for fiscal sustainability and policy design, as in coming decades its labour force begins to shrink, and the older population becomes relatively more numerous. In this paper, we demonstrate how strong data sources, from international agencies, national sources, and surveys of the Health and Retirement Study (HRS) family, are available and can be combined to generate a statistical profile of an emerging economy. Such profiles have value in themselves but can also be used as the basis for specifying macroeconomic models of demographic transition, of the overlapping generations (OLG) type, and for various other purposes. The profile presented here will serve to inform both policymakers and the broader community of the long-run trends which will inexorably impact Indonesian society in coming decades. It indicates that major social protection policy development will be needed over the next period to avert widespread hardship, especially among older cohorts.