Indonesia’s GDP Growth in Q2 reached 5.12%, surpassing market expectations and signaling the strongest expansion in two years. According to the Central Statistics Agency (BPS), the second-quarter performance exceeded both the previous quarter’s 4.87% and the Reuters poll forecast of 4.80%.
“GDP growth showed a positive surprise in the second quarter compared to our expectations, likely driven by a supportive net export balance due to frontloading,” said Radhika Rao, economist at DBS Bank, as quoted by Reuters. Analysts highlighted that this performance came despite concerns over weakening indicators such as declining car sales and slowing manufacturing activity.
Q2 GDP Growth Outpaces Forecasts
The official BPS report confirmed that Indonesia’s economic growth in Q2 was higher than in Q2 2024, which posted 5.05%. This achievement positioned the economy as one of the region’s strongest performers. The growth also reflects resilience amid global uncertainties, as external trade conditions remain challenging.
Economists pointed out that this momentum offers a positive signal for the remainder of 2025. However, they cautioned about possible headwinds in the coming months as global trade softens and external demand declines.
Household Consumption in Indonesia Remains Strong
Household consumption in Indonesia continued to play a dominant role in driving growth. BPS reported that household spending contributed 2.64% to overall GDP, with a year-on-year growth of 4.97%. This figure was supported by increased spending during major holidays, including Eid al-Fitr, Vesak, Ascension of Jesus Christ, and Eid al-Adha, as well as the school holiday season.
Rising demand for food, beverages, transportation, and dining reinforced consumption’s role as a key pillar of the economy. “This shows that domestic consumption remains dominant as the main driver of the national economy,” said Moh. Edy Mahmud, Deputy for National Accounts and Statistical Analysis at BPS.
Investment Growth and Infrastructure Push
Investment posted its strongest growth in four years, with Gross Fixed Capital Formation (GFCF) expanding 6.99% year-on-year. This surge came from robust private sector confidence and significant government capital expenditure. BPS noted that government capital spending rose by 30.37% compared to the same period last year, while imports of capital goods such as machinery jumped 28.16%.
Infrastructure projects, including the expansion of the high-speed rail network, played a critical role in supporting this increase. Analysts interpret this trend as a sign that investors maintain confidence in Indonesia’s economic prospects, even amid external uncertainties.
Exports, Government Spending, and Economic Outlook
Exports also contributed positively, growing 10.62% year-on-year. Non-oil and gas commodities, such as palm oil, iron and steel, machinery, and electrical equipment, drove this performance. Export services increased as well, in line with the rising number of foreign tourist arrivals. However, exports only added 0.22% to overall growth, lower than in the previous quarter. In contrast, government consumption declined by 0.02% year-on-year, reflecting slower budget disbursement.
Maybank economist Brian Lee warned of potential challenges ahead. “We expect a 50 bps interest rate cut before the end of the year, while the government has planned to introduce a third stimulus package toward the end of the year, albeit on a smaller scale,” he said. Lee also noted that the trade surplus could narrow due to weaker global demand for Indonesia’s key commodities.
What This Means for Indonesia’s Economy
The Q2 performance highlights Indonesia’s resilience and strong domestic foundation, particularly in consumption and investment. For businesses and investors, these trends open opportunities in sectors such as consumer goods, infrastructure, and manufacturing. Meanwhile, the government can leverage fiscal policy to sustain momentum in the coming quarters. Despite global uncertainty, Indonesia’s economic outlook for 2025 remains optimistic, supported by solid fundamentals and proactive policy measures.
Source: finance.detik.com, pusatdata.kontan.co.id
Image: Aera Bella / Canva
