Indonesia’s 2025 economic outlook remains cautiously optimistic despite a slow start in the first quarter. The Central Statistics Agency (BPS) reported that the national economy grew 4.87% year-on-year in Q1 2025, down from 5.11% in the same period last year. This slowdown reflects weaker household consumption, reduced public spending, and muted investment activity. Yet, business leaders believe the economy can rebound and reach a 5% growth rate in Q2, driven by strategic policies and seasonal opportunities.
Slower Growth in Q1 Raises Concerns
Indonesia’s economic performance in early 2025 fell short of expectations. The business community had hoped for 5% growth in Q1, but reality painted a more modest picture. One clear indicator was the sharp decline in Eid al-Fitr travel, with the number of travelers dropping from 193 million in 2024 to 146 million this year. This directly affected consumer spending and money circulation.
“We had predicted this, even though there was still some optimism that growth could hit 5% in Q1 2025. But in reality, it only reached 4.87%,” said Sarman Simanjorang, Deputy Chairman of the Indonesian Chamber of Commerce and Industry.
The weakening economic activity also coincided with a 1.38% contraction in government consumption due to budget tightening. Spending on travel, goods, and services was significantly reduced, further slowing growth momentum.
Read More: Weak Purchasing Power Leads to 24% Drop in Eid Travel 2025
Household Consumption Trend Remains a Key Driver
The household consumption trend continues to play a pivotal role in Indonesia’s economic stability. Accounting for nearly 60% of GDP, this sector only grew by 4.89% in Q1, a drop from last year’s figures and below the historical average of 5%.
Sarman emphasized the importance of boosting consumer confidence. “We want to ensure that our household consumption becomes more optimal going forward, because nearly 60% of our economic growth is still supported by household consumption,” he stated.
He also urged the government to stabilize the prices of essential goods, electricity, fuel, and gas. Keeping inflation in check would ease public concerns and support stronger consumer spending in the coming months.
Business Confidence and Government Strategy
Despite the current headwinds, business sentiment remains positive. Industry players are still keen to expand, anticipating that government action will support recovery in the near term. Seasonal drivers such as year-end holidays offer a promising outlook for Q4.
“With the government’s seriousness and responsiveness, we hope that our economic growth will continue to improve moving forward,” Sarman noted.
Business leaders also expect the government to maintain strategic programs aimed at revitalizing domestic consumption. These include fiscal incentives, simplified regulations, and proactive engagement with key sectors to encourage spending and investment.
Indonesia 2025 Economic Outlook: Path to 5% Growth
Looking ahead, the Indonesian 2025 economic outlook hinges on how effectively both the government and businesses respond to ongoing challenges. While Q1 growth undershot projections, leaders remain hopeful that targeted measures can drive a stronger Q2.
“These are important notes, and we must always remain optimistic about how we can restore our economic growth in Q2 2025 to reach 5%,” said Sarman.
He highlighted the importance of collaboration between policymakers and business stakeholders. By aligning efforts and focusing on domestic demand, Indonesia can stay on track toward its annual growth targets.
What Lies Ahead for Indonesia’s Economy
Indonesia’s short-term recovery depends on several key factors. Stimulating household consumption, maintaining price stability, and encouraging private investment will be crucial. While the start of 2025 has been slower than hoped, coordinated action could still deliver a robust second quarter.
Overall, the outlook remains cautiously optimistic. With continued cooperation and policy support, Indonesia has the potential to rebound and sustain its growth momentum through the rest of the year.
Source: ekonomi.bisnis.com
Image: tirto.id/Andrey Gromico
