Indonesia’s economic outlook for 2025 presents a mixed yet promising picture. Amid global economic uncertainties, the nation is poised to maintain stability while seeking growth opportunities through strategic reforms and policies.  

 

Steady Growth with Conservative Projections 

 

The Indonesian government has set an economic growth target of 5.2% for 2025, in line with its 2024 goal, as supported by the 2025 State Budget Law (UU APBN 2025). International organizations offer similar projections, with the IMF and World Bank estimating growth at 5.1% and the OECD and UNCTAD both forecasting 5.2%. 

 

Indonesia Economic Growth 2014-2024 (in %) 
 

Source: BPS, Indonesian Ministry of Finance 

 

Indonesia’s 2025 Economic Growth Forecasts (in %) 
 

Source: IMF, OECD, UNCTAF, World Bank, ADB, Bank Indonesia 

 

Global uncertainties, including geopolitical tensions, U.S. economic policies under Donald Trump’s administration, and China’s economic slowdown, pose significant risks. The strengthening U.S. dollar has already increased import costs, while potential trade wars could disrupt key export markets. 

 

Indonesia’s reliance on China and the U.S. as major trading partners underscores its vulnerability. With 30% of exports destined for China and 10% for the U.S., disruptions in these markets could dampen Indonesia’s growth. However, strategic diversification and increased self-reliance in production may mitigate these risks. 

 

Bank Indonesia (BI) has adopted a mixed policy approach to ensure economic stability. Measures include maintaining interest rates, stabilizing the rupiah, and promoting inclusive growth. BI’s initiatives, such as strengthening digital payment systems and controlling inflation, aim to build resilience against global economic shocks. 

 

BI Governor Perry Warjiyo remains optimistic, projecting growth between 4.8% and 5.6% in 2025. “Through collaborative efforts and prudent policies, we can navigate uncertainties and achieve sustainable growth,” he said during a recent Board of Governors meeting. 

 

Opportunities for Growth 

 

Indonesia’s demographic bonus—a large working-age population—offers significant economic potential. Investments in education, healthcare, and digital transformation are critical to harnessing this advantage. The government’s focus on digital adoption, including the expansion of QRIS (Quick Response Code Indonesian Standard), is expected to drive efficiency and innovation across industries. 

 

Household consumption remains the primary contributor to Indonesia’s economic performance, supported by the government’s decision to cancel a planned VAT hike from 11% to 12%. This move aims to sustain consumer spending and alleviate pressure on lower-income families. Stimulus packages, including subsidies for essential goods and services, further bolster domestic demand. 

 

Micro, small, and medium enterprises (MSMEs), which contribute 61% of GDP and employ 97% of the workforce, are also central to Indonesia’s economic strategy. Tax exemptions for MSMEs with revenues below IDR 500 million and incentives for production materials are expected to reduce costs and support growth. 

 

President Prabowo’s administration has prioritized attracting foreign investment to stimulate growth. Key initiatives include the development of downstream industries, particularly in nickel processing and renewable energy. The diversification of natural resource processing—from biodiesel to environmentally friendly plastics—is expected to enhance export competitiveness. 

 

In infrastructure, investments in the new capital city Nusantara, irrigation systems, and renewable energy projects like hydropower and biofuels reflect the government’s commitment to long-term economic development. These efforts align with Indonesia’s goal of becoming a global leader in sustainable practices and green energy. 

 

Cautiously Optimistic 

 

Indonesia’s economic outlook for 2025 reflects a delicate balance between resilience and ambition. While external pressures pose challenges, the country’s strategic focus on domestic consumption, investment in innovation, and renewable energy transition provides a pathway for stable growth. With continued reform and strong leadership, Indonesia should be able to weather global headwinds, while capitalizing on emerging opportunities.