World Bank Report Highlights Indonesia's Labor Market Challenges

Economic Growth vs Labor Quality

The World Bank's latest report, 'Digital Foundations for Growth,' released in December 2025, underscores that Indonesia's labor market continues to face significant quality challenges despite the country's maintained macroeconomic stability. The report notes that while private consumption remains a key driver of economic growth, its contribution has slightly decreased from 2.8 percentage points (54.8% of GDP growth) in 2024 to 2.7 percentage points (53.3% of GDP growth) in the current year.

Key Labor Market Indicators

The report emphasizes that various labor market indicators reveal persistent quality issues in employment. These challenges are affecting household welfare and potentially constraining further economic progress. The World Bank's analysis suggests that improving labor market quality is crucial for sustaining economic growth and enhancing household well-being.

Policy Implications

The findings of this report have significant implications for policymakers. Addressing labor market quality will likely require comprehensive measures that go beyond macroeconomic stability. These may include investments in education and training, improvements in labor market regulations, and initiatives to enhance productivity in various sectors of the economy.