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Indonesia's 2025 Economic Growth Projection Drops Simultaneously

Indonesia's economic growth projections for 2025 from a number of international institutions and domestic authorities unanimously show a trend of cuts. The magnitude of global pressure and declining domestic productivity, exacerbated by a wave of layoffs, make it difficult to boost consumption growth.bThe Organization for Economic Co-operation and Development (OECD), the International Monetary Fund (IMF), the World Bank, and Bank Indonesia (BI) unanimously estimate that Indonesia's economic growth in 2026 will be below 5 percent. This projection is lower than the government's optimistic target of 5.2 percent. The OECD in its June 2025 edition of the Economic Outlook report lowered its projection for Indonesia's growth next year from 4.9 percent to 4.7 percent. This is the second decline in the current year, after the OECD cut its 2025 projection from 5.2 percent to 4.9 percent in March. The OECD highlighted the decline in business and consumer confidence due to fiscal uncertainty and high borrowing costs, which have the potential to depress private consumption and investment. On the other hand, weakening commodity prices and escalating global trade tensions have also burdened Indonesian exports. Two months earlier, the World Bank in its April 2025 edition of the Macro Poverty Outlook report cut its projection for Indonesia's economic growth from 5.1 percent to 4.7 percent for 2025. The World Bank also estimated that Indonesia's average economic growth would only be in the range of 4.8 percent until 2027. In its report, the World Bank cited falling commodity prices, global policy uncertainty, and domestic structural barriers as the main factors behind the slowdown in growth.bThe report also underlined declining productivity as a medium-term issue. Indonesia's total productivity growth was recorded to have fallen from 2.3 percent to 1.2 percent between 2011-2024.bMeanwhile, the IMF also revised down Indonesia's growth projection to 4.7 percent in the April 2025 edition of the World Economic Outlook. The revision is in line with the economic growth projections of ASEAN-5 countries which also declined significantly from 3.6 percent in 2024 to 3 percent in 2025. 

Full of challenges 

Director of the Center of Economics and Law Studies (Celios) Bhima Yudhistira assessed that the projections from several international institutions were more realistic than the government's target. He considered economic growth in the second semester of 2025 to be full of challenges, considering that the seasonal moment of Eid which had boosted consumption had passed.b"So there is no longer a driving force for household consumption throughout the rest of this year," he said, Sunday (8/6/2025).bThe economy in the first quarter of 2025 was recorded to have grown 4.87 percent annually or slowed down compared to the previous quarter which grew 5.02 percent. Bhima predicted that the slowdown in growth would continue in the second quarter of 2025.  The government is trying to maintain economic growth in the second quarter of 2025 in the range of 5 percent by utilizing the momentum of the June-July 2025 school holidays, by providing various economic stimuli to maintain people's purchasing power and increase domestic consumption. However, Bhima highlighted the limited impact of the government's economic stimulus. The Wage Subsidy Assistance (BSU) disbursed in June is considered not to have touched the informal sector widely. BSU worth IDR 300,000 per month was given to around 17.3 million workers with salaries below IDR 3.5 million and ASN teachers, but its implementation was only for two months.b"The effectiveness of this stimulus on growth is limited, not enough to encourage the economy to grow above 5 percent in the second and third quarters," said Bhima. 

Tag: Bhima Yudhistira International Monetary Fund OECD