Indonesia: Rich in Commodities with Aspirations of Becoming an EV Battery Hub.

Indonesia is the largest producer of palm oil. View of palm oil plantation in Cigudeg, Bogor. Wikimedia. Used with permission.

Indonesia: Rich in Nickel with Aspirations of Becoming an EV Battery Hub.
Indonesia Predicted to Have Strong GDP Growth in 2025
 
Looking for country diversification in your wealth plan? Wondering if adding Asia can increase performance? (It certainly hasn’t been the case with Chinese equities.) Indonesia is predicted to have one of the strongest GDP growths in the world in 2025 (at 5.1%), with a debt to GDP ratio that is far lower than most developed world countries, at 39.6%. So, what are the risks and potential rewards of investing in Indonesia?
 
Below are the topics we’ll cover in this blog.
 
5.1% GDP growth
39.6% Debt to GDP
BBB Credit Rating
4.85% Yield
Risk Factors
 
And here is more information on each point.
 
5.1% GDP Growth
Indonesia is a major manufacturing hub. It is also the number one producer of nickel, which is used in stainless steel, lithium ion batteries and other products. Indonesia is a major exporter of crude petroleum, natural gas, rubber, coffee, cocoa and palm oil. Many of their exports are used daily by consumers around the world. Many economists are predicting that Indonesia will be in the Top 4 World Economies by 2050. It is already the 10th largest economy by purchasing power equity.
 
The country has export bans on nickel, as it moves to offer higher-value nickel products, such as lithium-ion batteries. Their first EV battery plant opened in Java in 2024. Indonesia has the world’s top nickel reserves, alongside Australia (source: U.S. Geological Survey).

39.6% Debt to GDP
Indonesia’s debt to GDP is much lower than the developed world. However, this nation is heavily reliant upon commodity prices, which have had wild swings over the past five years. For instance, the price of nickel is half today of what it was in March of 2022.
 

Fluctuating revenue (taxes and commodities) makes it more difficult and expensive for Indonesia to raise money in tough times, which is why the focus is on bringing in more government revenue and lifting the locals out of poverty. In 2025, the VAT (value-added tax) will increase by 1%. Indonesia has been successful in reducing the poverty rate to 9.4% in 2023. However, the country still has a very low GDP capita of just 5.25 thousand (compared to 107.24 thousand in Ireland, the 3rd highest in the world).
 
BBB Credit Rating
The high GDP growth and relatively lower debt to GDP ratio help Indonesia to remain investment grade, albeit at the lowest rung. If the debt levels were to increase, or if foreign investors lose confidence in the Indonesia economy, the credit rating could be downgraded. Increased tax revenue, lower reliance on commodity prices and improvements in “governance standards” could help Indonesia’s credit rating to improve.
4.85% Yield
The iShares MSCI Indonesia ETF currently has a 4.85% yield. That is much higher than most U.S. investment grade value funds offer.
 
Risk Factors
According to the Index of Economic Freedom, “Corruption remains a serious impediment to the emergence of a more dynamic private sector.” Property rights, government integrity and judicial effectiveness all rank low on the index. This has the potential to spook investors. However, if the trend toward EV battery factories continues, the story about Indonesia could become more seductive.
 
Another risk is that the share price of the EIDO ETF has been volatile over the past five years. The fund is trading near its 5-year low, at a time when U.S. equities are still close to their all-time highs. Rebalancing and dollar-cost averaging can help to smooth out the wild swings in share price.
 
Bottom Line
Indonesia’s economy is expected to grow at more than twice the speed of the U.S. economy in 2025. The trajectory is that the economy will rise from 10th in the world this year (in purchasing power equity) to 4th over the next two decades or so. The commodities that the country export are key to the daily lives of citizens around the world. At the same time, investor appetites wax and wane (something that can happen with all industries, even the super hot technology sector).
 
With an age-appropriate, diversified plan, adding a slice of Indonesia might be a good idea for an investor who is interested in one of the fastest growing economies in the world, and is willing to take on the risk of Asia and a developing economy. It’s always a good idea to have a plan to capture gains, something that regular rebalancing can assist with. (Rebalancing 1-3 times a year is easy and manageable with our easy pie chart system.)
 
 
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Natalie Wynne Pace is an Advocate for Sustainability, Financial Literacy & Women's Empowerment. Natalie is the bestselling author of The ABCs of Money and The Power of 8 Billion: It's Up to Us, and is the co-creator of the Earth Gratitude Project. She has been ranked as a No. 1 stock picker, above over 835 A-list pundits, by an independent tracking agency (TipsTraders). Her book The ABCs of Money remained at or near the #1 Investing Basics e-book on Amazon for over 3 years (in its vertical), with over 120,000 downloads and a mean 5-star ranking. The 6th edition of The ABCs of Money and the 2nd edition of Put Your Money Where Your Heart Is are the most recent releases of these books. Follow her on Instagram. 
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