Digital Transformation and Its Impact on the Economy and MSMEs in Indonesia

Abstract

Digital transformation has become a key driver in shaping modern economic dynamics, particularly in Indonesia, which represents one of the fastest-growing digital markets in Southeast Asia. This study aims to analyze the role of digital technologies, including artificial intelligence, big data, the Internet of Things, and cloud computing, in fostering economic transformation, changing consumption patterns, and supporting the adaptation strategies of small and medium-sized enterprises. The research adopts a qualitative approach with a literature review model, focusing on scholarly articles. The findings reveal that digitalization enhances business efficiency, expands market access, and drives the growth of e-commerce and the cashless society. Consumer behavior has shifted from traditional offline shopping toward online purchasing, alongside increasing adoption of digital payment systems. For small and medium-sized enterprises, digitalization creates opportunities for innovation and competitiveness but also presents challenges such as limited digital literacy, financial constraints, and data security issues. This study highlights the importance of collaboration between government, academia, and the private sector in strengthening an inclusive and sustainable digital ecosystem. Thus, digital transformation is not only a technological phenomenon but also a strategic instrument for national economic development.