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Indonesia sets sights on 5.2% growth in 2025, surpassing World Bank's projection

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Jakarta Globe - January 17, 2025

Arnoldus Kristianus, Jakarta – Indonesia aims to exceed the World Bank's 2025 growth projection of 5.1 percent, targeting 5.2 percent by boosting domestic consumption and encouraging local investment, according to Chief Economic Affairs Minister Airlangga Hartarto.

"We remain optimistic. It's still January, so let's see how things progress," Airlangga said at his office in Jakarta on Friday.

The government is pinning its hopes on the Ramadan and Eid periods in the first quarter of 2025, with Eid set to take place on March 31. Traditionally, consumption spikes during Ramadan and the festive season, providing a boost to the economy.

"In March, we'll have Eid, so we'll continue to focus on boosting the consumption sector," Hartarto added.

The government is also working on finalizing a policy to encourage exporters to keep their foreign exchange earnings (DHE) in domestic financial markets, a move that could strengthen the domestic economy and buffer it against global economic turbulence.

"We are fine-tuning the final details. We hope to launch this soon to enhance the fundamentals of our economic resilience," Hartarto said.

Despite the optimism, Bank Indonesia recently lowered its growth forecast for 2025 to a range of 4.7 percent to 5.5 percent slightly down from the earlier range of 4.8 percent to 5.6 percent.

"Indonesia's economy is growing well but with a tendency to be lower than our previous forecasts," said Perry Warjiyo, the central bank's governor.

The export performance is expected to slow, as demand from major trading partners, excluding the United States, weakens. Domestic consumption is also sluggish, particularly among lower-income groups, due to uncertain income expectations and limited job opportunities.

"Meanwhile, private investment remains subdued because production capacity is still sufficient to meet both domestic and export demand," Warjiyo noted.

The World Bank's Global Economic Prospects report projects global growth to remain steady at 2.7% in 2025 and 2026, mirroring the expected pace in 2024, as inflation and interest rates decline. For Indonesia, the World Bank's growth forecast is higher than the average 4 percent growth expected for developing economies. However, these projections are seen as insufficient to meet the development goals needed to address poverty and broader challenges.

Developing economies, which account for 60 percent of global growth, are facing a weaker long-term outlook, according to the World Bank's Chief Economist, Indermit Gill.

"The next 25 years will be a tougher slog for developing economies than the last 25," Gill said, citing factors such as high debt, weak investment, productivity stagnation, and rising climate costs.

Source: https://jakartaglobe.id/business/indonesia-sets-sights-on-52-growth-in-2025-surpassing-world-banks-projectio

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