While global and domestic challenges persist, Indonesia is well-positioned to maintain stable growth in 2025 with the right mix of responsive policies, business support, and infrastructure investment, Yukki Nugrahawan Hanafi, Chairman of ALFI Institute, has said.
International Monetary Fund – IMF – has revised Indonesia’s projected economic growth for 2025 to 4.7%, down from a previous forecast of 5.1%, but according to Yukki, there remains realistic and optimistic potential for growth to still reach 5%.
He explained that despite early signs of a slowdown in the first quarter, but several key domestic indicators remain stable, and progress in global tariff negotiations, particularly involving the U.S., Indonesia, China, and other countries, offers a more measured outlook for the rest of the year.
“In the first quarter of 2025, Indonesia’s economy showed resilience in the face of global uncertainty,” he said.
Yukki explained some notable indicators for Indonesia. First, balance of payments surplus, saying the balance of payments recorded a surplus of USD 4.3 billion, supported by robust foreign exchange reserves amounting to USD 157.1 billion, equivalent to 6.7 months of import cover.
Second, exchange rate stability. While the rupiah faced pressure, it remained relatively stable at IDR 16,855 per USD, with potential to strengthen to IDR 16,500 in line with a weakening U.S. dollar.
Third, controlled core inflation. Core inflation held steady at 2.48% year-on-year, signaling sustained domestic consumption and controlled price levels.
Yukki also noted that the reciprocal tariffs imposed by the U.S. are exerting pressure on growth. According to the Ministry of Finance, these tariffs could shave off up to 0.5% from GDP. However, the situation also presents an opportunity. The trade war encourages the government to accelerate deregulation, improve ease of doing business, enhance industry competitiveness, and diversify export markets.
With negotiations underway between the U.S. and several global players, including China and the EU, the economic headwinds of 2025 appear increasingly manageable. That said, a responsive and strategic policy approach is critical to maintaining growth momentum.
Recommendations to Sustain Growth
To sustain and potentially exceed the 5% growth target, the Indonesian government must adopt several targeted strategies:
First, fiscal stimulus and business support. Yukki suggests to provide fiscal incentives and streamline procedures for businesses impacted by tariffs. Government spending should be made more adaptive to support domestic demand.
Second, monetary policy adjustments. With global USD weakness, Bank Indonesia should consider lowering interest rates to reinvigorate private sector activity and investment.
Third, leverage trade diversification. Indonesia can benefit from the relocation of companies from China and Vietnam—countries facing higher tariffs. To capitalize on this, the government must ensure investment-friendly policies, regulatory certainty, security, and skilled human capital.
Fourth, boost domestic consumption: Strengthening purchasing power—especially among the middle class—is essential. This can be achieved through consumer spending incentives, job creation in high-multiplier sectors (e.g., manufacturing, F&B, tech, and MSMEs), and targeted subsidies or tax relief.
Logistics Strategic Role
The logistics and transportation sector remains a cornerstone of Indonesia’s economic engine. According to BPS data, this sector grew by 13.96% in 2023 and contributed IDR 1,000 trillion to GDP.
Recent investment figures from BKPM highlight this further. In Q1 2025, the transportation, warehousing, and telecommunications sector attracted IDR 66.5 trillion in investment, a 14.3% of total realization, —making it the second-largest contributor.
However, despite this strong performance, Indonesia’s logistics efficiency lags behind regional peers, ranking 63rd out of 139 countries. For comparison, Singapore ranks 1st, Malaysia 26th, Thailand 34th, the Philippines 43rd, and Vietnam 43rd.
To improve logistics performance and sustain economic growth, Yukki calls the government to focus on accelerating infrastructure development, embracing digital transformation, and streamlining regulations in the transport and logistics sector.
Such efforts will not only enhance domestic efficiency but also boost Indonesia’s integration into global trade networks—an increasingly vital factor amid shifting trade dynamics and ongoing tariff negotiations.