JAKARTA – The government’s fiscal stimulus towards the end of the year is predicted to be the main driver of Indonesia’s accelerated economic growth. Several analysts believe that, although growth remains around 5 percent, there is ample room to accelerate the economy through accelerated spending and strengthened domestic consumption.
Muhammad Rizal Taufikurahman, Head of Macroeconomics and Finance at the Institute for Development of Economics and Finance (Indef), estimates that Indonesia’s economic growth in the third quarter of 2025 will reach 5.0%–5.2%, a slight increase from the previous quarter’s 5.12%. This increase still stems from the effects of the fiscal cycle and short-term consumption, not from structural strengthening of the economy.
“The economy grows because it is driven, not because it strengthens. Expansive government spending and stable food prices do provide room for consumption, but the purchasing power of the lower-middle class has not fully recovered,” said Rizal.
Rizal emphasized that growth in the third quarter reflects nominal stability rather than real productivity gains. Government spending is the main driver of domestic consumption, while private investment continues to hold back expansion due to global uncertainty and high interest rates.
“The engine of growth is still driven from above, not driven by market dynamics. To maintain sustainability, the government needs to shift its focus to structural growth by improving the efficiency of public spending and expanding the productive tax base,” he said.
Regionally, optimism is also evident in East Java. Brawijaya University economist Joko Budi Santoso projects East Java’s economy to grow by 5.2–5.7% in 2026, driven by fiscal spending in the productive sector and strengthening public purchasing power.
“Strengthening consumption is key because its contribution to GRDP reaches 60%. In the long term, the manufacturing sector must be the engine of growth to achieve the Golden Indonesia target,” he said.
Meanwhile, Gundy Cahyadi, Research Director of the Prasasti Center for Policy Studies (Prasasti), said consumption growth is starting to improve, reflected in the 5.8 percent increase in retail sales in September 2025—the highest since the beginning of the year. However, core inflation of only 2.2 percent indicates that consumption growth remains limited.
“What we’re seeing now is stabilization, not a surge. The good news is that the economic foundations remain solid,” he said.
From a fiscal perspective, government spending realization as of September had only reached 59.7 percent of the annual target, leaving room for acceleration in the fourth quarter. The accelerated spending is predicted to boost economic activity through infrastructure projects, food subsidies, and social protection programs.
“The increase in fiscal spending at the end of the year is a crucial momentum to drive growth above 5 percent and maintain economic resilience amidst global uncertainty,” he concluded. (*/rls)
