Province

North Sumatra

Overview Economy

North Sumatra, a large salad bowl of people

North Sumatra, whose capital is Medan, ranks as the fourth most populous province in Indonesia, following West Java, East Java, and Central Java, with up to 15.1 million residents as of 2022. Rather than being a melting pot, the province is best described as a large bowl of salad, comprised of diverse ethnicities, cultures, and religions.

Ethnically diverse, North Sumatra is home to several indigenous groups. The Malay people reside along the east coast, while the Batak people inhabit the west coast and the central highlands region around Lake Toba. The Batak people are further categorized into six groups based on region, culture, and location: Pakpak, Angkola, and Mandailing on the west coast, and Toba, Simalungun, and Karo in the central highlands. Additionally, North Sumatra is home to the Nias people, who are natives of the Indian Ocean Island of Nias and its surrounding islets.

Residents of Chinese and South Asian descent together constitute a small but significant minority in North Sumatra, along with descendants of historical migrants from Java and migrants from other surrounding regions. These regions include the Minangkabau people of West Sumatra, the Palembang people of South Sumatra, and the Acehnese.

Furthermore, North Sumatra is home to a predominantly Muslim population, constituting over 60 percent of residents, followed by Christians (Protestant and Catholic) and Buddhists. Despite this great diversity, the province maintains generally harmonious inter-ethnic and inter-religious relations. However, at the same time, primordialism plays a role in both society and political life.

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North Sumatra’s economy, leading sectors

North Sumatra is one of the leading economies on the island of Sumatra, experiencing positive economic growth in recent years. For instance, in 2022, the province's economy expanded by 4.73 percent, a significant increase from 2.61 percent in 2021 and a notable recovery from -1.07 percent in 2020.

Several sectors are driving North Sumatra's economic growth: agriculture, trade, and construction.

As one of the country’s plantation centers, North Sumatra relies on key commodities such as palm oil, rubber, coffee, cocoa, and tobacco in its agriculture sector. Palm oil plantations owned by the people of North Sumatra are primarily concentrated in Asahan regency, accounting for over 15 percent of all palm oil plantations in the region, while coffee (robusta and arabica) is produced in the regencies of North Tapanuli, Simalungun, and Dairi.

Trade is also a key sector in North Sumatra’s economy, with the province exporting agricultural products like coffee, tea, and spices, as well as industrial products, specifically animal and vegetable fats and oils. As of 2022, the leading export commodity is vegetable fats and oils, reaching a significant export value of US$4.71 billion. Typically, these commodity exports from the province find their way to the Asian region, particularly China, as well as the United States. In terms of imports, North Sumatra's imports are predominantly raw/auxiliary materials, followed by capital goods and consumer goods.

Furthermore, North Sumatra's economy has increasingly relied on the non-trade sector, dominated by services, notably construction. North Sumatra’s Regional Gross Domestic Product (GRDP) in the construction sector has risen from Rp 64 trillion (US$4 billion) in 2018 to an estimated Rp 70 trillion (US$ 4.4 billion) in 2022. Moreover, the construction sector has become a major contributor to North Sumatra's employment industry.

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Latest News

December 2, 2025

The Center of Economic and Law Studies (CELIOS) projected the impact of massive floods in Sumatra Island to cause the national gross domestic product (GDP) to decrease by Rp 68.67 trillion, or around 0.29 percent. CELIOS emphasized that the floods has a national impact due to their negative effect towards the flow of consumer goods and industrial needs, especially in North Sumatra as one of the nation's industrial hubs.

"When a disaster occurs in a region that disrupts transportation, the impact is not only felt in that province but also negatively impacts the national economy," said CELIOS Executive Director Bhima Yudhistira in an official statement on Dec. 1, 2025.

In terms of regional damage, the economy of Aceh Province is predicted to suffer losses of Rp 2.04 trillion, while North Sumatra and West Sumatra is expected to suffer Rp 2.07 trillion and Rp 2.01 trillion of losses, respectively.

These losses are calculated based on several assumptions. First, losses to houses, with each house reaching Rp 30 million. Second, losses to bridges, with each bridge rebuilding cost reaching Rp 1 billion. Third, losses to family income, based on the average daily income of each province multiplied by 20 workdays. Fourth, losses to rice fields, with losses reaching Rp 6,500 per kilogram assuming a yield of seven tons per hectare. Fifth, road repairs per 1,000 meters reaching Rp 100 million.

"When a natural disaster occurs, it disrupts distribution channels and causes trade to weaken. Furthermore, public consumption also weakens due to the lack of income during the disaster period," explained Bhima.

He assessed that this ecological disaster was triggered by deforestation due to land conversion into oil palm plantations and mining. The economic researcher believes that the contribution from mining and palm oil to Aceh, for example, is not comparable to the losses caused by the disaster.

"Aceh lost Rp 2.04 trillion, greater than its mining non-tax revenue of Rp 929 billion as of Aug. 31, 2025," Bhima explained.

Therefore, CELIOS is urging an immediate moratorium on both mining permits and the expansion of oil palm plantations. The government is also being urged to shift to a more sustainable economy.

"Without structural changes to the economy, ecological disasters will recur with far greater economic losses," Bhima concluded.

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