Dynamics of Economic Development in Facing Contemporary Global Challenges

Abstract

Economic development in the contemporary era faces various complex challenges such as digitalization, climate change, social inequality, and global geopolitical uncertainty. Indonesia, as a developing country, has also experienced the impacts of these changes, especially after the COVID-19 pandemic, which slowed economic growth and widened the development gap between regions. This study aims to analyze the influence of contemporary challenges on economic development in Indonesia, specifically the influence of digitalization, climate change, dependence on foreign trade, and social inequality on regional economic growth. The study uses a quantitative approach with panel data analysis on all provinces in Indonesia during the period 2010–2023. Data were obtained from the Central Bureau of Statistics, Bank Indonesia, the World Bank, the IMF, the ITU, and the IPCC, then analyzed using a panel regression model with the help of EViews and Stata software. The results show that internet penetration has a positive and significant effect on economic growth through increased productivity and strengthening digital MSMEs. Conversely, climate change, social inequality, and dependence on primary commodity exports have a negative impact on economic stability and growth. This study emphasizes the importance of inclusive, digital-based, and climate-resilient economic development to support sustainable development in Indonesia .