If Vietnam can hit 8% growth, so can Indonesia

With its structural depth, demographic advantage, policy ambition, and strategic vision, Southeast Asia’s largest economy can even exceed its growth target.

When Vietnam announced an 8% growth rate for 2025, economists across Asia took note.

This was not a miracle, but the result of methodical economic positioning that transformed vulnerabilities into engines of expansion.

Vietnam’s experience offers a useful benchmark — and an important lesson — for Indonesia, which is poised to achieve even more.

Yet Indonesia’s larger ambition — driven by its size, resources, domestic demand, and strategic positioning — makes an 8% growth trajectory not only desirable but attainable.

Its Danantara Sovereign Fund alone is US$900 billion (RM3.66 trillion). But before one understands Indonesia, it is vital to understand Vietnam.

Overcoming the odds 

Vietnam’s remarkable performance in 2025 reflects four interlocking dynamics.

First, export dynamism remained the core driver of growth.

In the face of the 20% US import tariffs on Vietnamese products, Hanoi recorded total exports of roughly US$475 billion (RM1.9 trillion), up 17% year-on-year.

Notably, exports to the US rose to record levels, generating a trade surplus that defied tariff barriers and global recessionary pressures.

These export gains helped lift industrial and retail production by over 9%, while inflation stayed subdued at around 3%.

Foreign investment inflows also rose by nearly 9%, reflecting investor confidence in Vietnam’s manufacturing ecosystem.

Second, Vietnam has become a global manufacturing hub.

Multinational firms from South Korea, Japan, the US and increasingly China have established major production bases in Vietnam for electronics, apparel and consumer goods.

Towns such as Bắc Ninh have been transformed from agrarian backwaters into industrial cities, buoyed by export-oriented corridors that benefit from global supply chain shifts away from China.

Third, domestic demand growth — notably household consumption and investment — supported broader economic momentum.

While export performance captured headlines, Vietnam’s internal market also expanded as incomes rose and middle-class consumption strengthened.

Fourth, strategic resilience in trade and investment policy helped Vietnam absorb external headwinds, integrating tariff pressures with diversification into new markets and sectors.

Vietnam is now actively pursuing additional trade deals to reduce its dependency on any single market, even as it aims for an ambitious 10% average growth rate through 2030.

Vietnam’s achievement is impressive, but it also underscores a broader truth: growth at these levels is possible in Southeast Asia when countries align structural advantages with global trends.

For Indonesia — an economy several times larger and far more diversified — the opportunity is profound.

Indonesia’s unique growth advantage 

Indonesia’s growth trajectory is underpinned by a set of structural factors that go beyond what Vietnam has achieved:

First, Indonesia is the largest economy in Southeast Asia and a member of the G20. Its sheer economic scale gives it a larger domestic market cushion.

While Vietnam’s growth remains heavily export-driven, Indonesia’s domestic consumption accounts for over half of GDP, offering an internally sustained engine of expansion.

Second, Indonesia’s economic base is more diversified. Manufacturing, services, natural resources, and digital economy sectors all contribute significantly to GDP.

While, Vietnam’s growth has been concentrated in manufacturing exports, Indonesia can draw equally from sectors such as mining and energy, downstream processing industries, agriculture, tourism and services.

Even with global trade uncertainties, these sectors provide structural ballast.

Third, Indonesia is pursuing policies to move up the value chain. Government strategies promoting industrial downstreaming — such as value-added processing of minerals like nickel and copper — are starting to deliver results that are less sensitive to global commodity price swings and more resilient over time.

Fourth, Indonesia’s aspiration to join the Organisation for Economic Cooperation and Development (OECD) reflects a commitment to governance reform and global economic integration that can bolster investor confidence.

This push towards higher institutional standards can accelerate productivity gains, enhance regulatory predictability, and draw sustainable investment into high-value sectors.

Fifth, Indonesia’s demographic bonus — expected to peak between 2030 and 2040 — will dramatically expand the workforce and domestic consumer base.

This demographic dividend provides a structural tailwind for productivity and consumption that Vietnam does not benefit from to the same extent.

These advantages mean that Indonesia’s baseline growth projection — currently around 5% to 5.5% in 2025–26 according to World Bank and OECD estimates — can accelerate significantly under the right policy mix and investor confidence.

From resilience to acceleration 

Indonesia’s current challenge, as with Vietnam’s past experience, is to transform resilience into acceleration.

For much of its recent history, Indonesia has proven its capacity to withstand external shocks — whether through absorbed tariff pressures, commodity price volatility, or geopolitical disruptions.

Indonesia’s mandiri ethos of self-reliance is not nationalist rhetoric but strategic praxis: it has repeatedly enabled the economy to absorb shocks without derailing long-term development goals.

Its success in owning its economic trajectory hinges on a few pivotal moves:

• Synchronising domestic demand with export competitiveness.

While exports — especially diversified manufacturing and value-added commodities — remain important, Indonesia must ensure that its domestic market continues to expand rapidly, powered by rising household incomes, investment and innovation.

•  Structural upgrades in infrastructure and human capital.

Investment in transportation, digital infrastructure, education and skills development will enable Indonesia to avoid the middle-income trap and harness productivity from its demographic dividend.

•  Institutional reforms and governance enhancements.

Accession to global frameworks such as the OECD would signal Indonesia’s commitment to transparency, rule of law and economic openness — critical ingredients for unlocking long-term investment and productivity growth.

•  Deepening integration into regional and global value chains.

Indonesia must continue to attract high-technology and high-value industries, just as Vietnam has built itself into global manufacturing circuits.

Strategic implications for Southeast Asia and beyond 

Vietnam’s 8% growth is a benchmark, not a ceiling.

What it demonstrates is that Southeast Asian economies can thrive even amid global turbulence.

For Indonesia, the path to 8% growth is not merely possible — it is a strategic imperative.

A large, dynamic Indonesia with sustained high growth reinforces Asean’s collective clout, stabilises regional markets, and binds global investors to a vibrant and expanding economic bloc.

In a world buffeted by geopolitical competition and economic retrenchment, Indonesia’s growth story is a tale of strategic resilience turned into global opportunity.

If Vietnam can reach 8%, Indonesia — with its structural depth, demographic advantage, policy ambition and strategic vision — can too.

The challenge now is to act with purpose, coherence and foresight. Southeast Asia’s future will be shaped not merely by who grows fastest, but who grows most resiliently, inclusively and sustainably.

For Indonesia, an 8% growth economy is not an aspiration on paper — it is a vision within reach. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.