Indonesia’s Economy in 2025 Projected to Grow 5.0%, Inflation Under Control at 2.4%

Jakarta: Head of Macroeconomic & Financial Market Research Department at Bank Mandiri, Dian Ayu Yustina, projected Indonesia’s economic growth in 2025 to reach 5.0 percent, while inflation is expected to remain under control at around 2.4 percent.

“Inflation will remain healthy, within Bank Indonesia’s target range at 2.4 percent,” she said during the Mandiri Economic Outlook Q3 2025 held virtually, Friday, August 29, 2025.

According to Dian, improving global sentiment has also provided positive support. The trade agreement between the United States and its partners is expected to ease uncertainties, preventing the global economic slowdown from having a major impact on Indonesia. This condition could open additional opportunities for national export performance.

On the fiscal side, the 2025 economic outlook is projected to remain in line with the government’s target. The fiscal deficit is forecast to reach 2.78 percent of gross domestic product (GDP). She noted that one of the main challenges lies in state revenues, which are highly dependent on global economic trends and commodity prices.

Heading into 2026, Bank Mandiri expects government priority programs to continue driving economic growth. The state budget (APBN) is projected to increasingly focus on strategic sectors while maintaining fiscal resilience. The 2026 fiscal deficit is expected to remain healthy at 2.5 percent of GDP, supporting market stability.

Inflation risks remain on the horizon

Bank Mandiri Chief Economist Andry Asmoro added that inflation is projected to stay within 2.3 percent to 2.6 percent in Q3 2025. The government has already anticipated potential food inflation pressures through its food supply and price stabilization program (SPHP), allocating 1.3 million tons of rice for the July–December 2025 period. This move is expected to normalize rice supply in the second half of 2025.

“However, the risk of inflation rising to 2.6 percent in Q3 must be closely monitored if food price pressures persist,” Andry explained.

Indonesia’s inflation in July 2025 stood at 2.37 percent year-on-year (yoy), remaining under control despite being influenced by education costs and food prices.

From a sectoral perspective, while national economic growth remained relatively stable at 5.12 percent yoy in Q2 2025, certain sectors posted much higher growth. Household consumption continued to be the main growth driver, fueled by Eid al-Fitr and school holidays.

Household consumption grew 4.97 percent yoy, up from 4.89 percent in Q1 2025. Another growth driver was investment, which jumped 6.99 percent yoy in Q2 2025.

The transportation and warehousing sector expanded 13.5 percent yoy, other services grew 10 percent, accommodation and food & beverages rose 9.7 percent, and information & communications grew 7.7 percent. However, these sectors still contribute relatively less to GDP compared to major ones such as manufacturing, trade, and agriculture.

Boosting agricultural sector growth a priority

Andry stressed that the government’s main challenge is accelerating growth in large sectors with significant contributions to the economy.

“For example, if agricultural growth can be raised from two percent to four percent, the impact on overall national economic growth would be substantial,” he said.

He added that from a monetary perspective, Bank Indonesia’s policy is expected to remain accommodative, with room for easing should price stability be maintained and external risks mitigated.

Meanwhile, fiscal policy must also be more accommodative, with faster budget realization to serve as a buffer for the economy amid heightened global uncertainty.

Also read:  Indonesia Maintains 5% Growth, Becomes Model for ASEAN Economies