By: Rivka Mayangsari*)
Amid increasingly complex global pressures and international economic uncertainty, Indonesia has demonstrated its resilience as one of the largest economies in Southeast Asia. In the first quarter of 2025, the national economy grew by 4.87 percent year-on-year. Although slightly below market expectations of 4.91 percent and slowing down from the previous quarter’s 5.02 percent, this figure is a significant achievement. At a time when many countries are experiencing a slowdown, Indonesia continues to grow, reflecting the strength of its economic foundations.
This slowdown in growth was largely due to a contraction in government spending of 1.38 percent, after previously growing by 4.17 percent in the fourth quarter of 2024. However, household consumption continued to grow steadily at 4.89 percent, while investment continued to record growth of 2.12 percent. This figure shows that Indonesia’s main growth engine is still running, despite the pressure. A strong domestic consumption foundation has been an important buffer against external shocks, and a key differentiator between Indonesia and other countries that are more dependent on the external sector.
Finance Minister Sri Mulyani Indrawati said that the new tariff policy imposed by the United States has the potential to cut Indonesia’s economic growth by between 0.3 and 0.5 percentage points of Gross Domestic Product. She also explained that the US government is providing a 90-day pause period, which she said is an important opportunity to strengthen dialogue and develop joint solutions to reduce the impact of the policy. In Sri Mulyani’s view, this pause period is being used by the Indonesian government to reduce, or even avoid, the potential for an economic slowdown through various diplomatic efforts and policy adjustments.
As a concrete step, Sri Mulyani said that the government has prepared various strategies, including increasing exports to the United States market, providing tax incentives to strategic sectors, simplifying import procedures, and relaxing local content regulations to increase the competitiveness of the national industry. She added that these policies are part of the big agenda of structural reform of the Indonesian economy. He also emphasized that state spending needs to be directed to be more efficient, targeted, and effective in supporting growth. According to him, Indonesia’s economic structure that relies on domestic consumption has provided a strong cushion against ongoing external pressures.
Deputy Minister of Finance Anggito Abimanyu stated that Indonesia’s domestic economic foundation is still relatively strong. He explained that growth in the first quarter of 2025, which was recorded at 4.87 percent, was driven by domestic demand and exports that remained solid. The government, according to him, continues to encourage increased investment, one of which is by strengthening the role of Danantara as a national sovereign wealth fund that has a strategic role in supporting long-term development.
The government’s commitment is also clearly visible in efforts to maintain the stability of staple food prices. Amid global food price pressures, the government has succeeded in holding back food inflation so that people’s purchasing power is maintained. Economic observer Doddy Ariefianto said that the success in maintaining food price stability is something that deserves to be appreciated. However, he also emphasized that this policy must be accompanied by further steps because, according to him, the elasticity of staple food consumption is relatively low and requires a more comprehensive approach in encouraging consumption growth.
In the first quarter of 2025, household consumption was recorded to have grown below five percent, while investment in capital goods increased by 2.1 percent. Although government spending has been corrected, the achievement of economic growth of 4.87 percent is an indication that the national economic structure is still strong. Head of the Monetary and Securities Asset Management Department (DPMA) of Bank Indonesia, Erwin Gunawan Hutapea, said that although the growth figure was slightly below expectations, Bank Indonesia still considered the achievement to be solid, especially amid ongoing global pressures.
In the medium to long term, the direction of Indonesia’s economic policy continues to focus on strengthening the domestic sector, increasing the competitiveness of the national industry, and expanding regional economic cooperation. The government emphasizes the importance of strengthening trade and investment relations with ASEAN countries as part of a strategy to strengthen the region’s economic resilience. Regional cooperation is considered very important to create stability and expand long-term growth opportunities.
With various policies that have been designed and implemented, Indonesia has once again proven its ability to maintain national economic stability amidst the ongoing global economic pressures.global unrest. Price stability, consumption growth, and investment that remains positive are proof that Indonesia is able to maintain growth momentum. Measured, responsive, and pro-people policies are important pillars in building a resilient and competitive economy. When the world is facing a downturn, Indonesia continues to move forward with its head held high, maintaining the direction of development, and continuing to transform into an advanced country that is economically sovereign.
The government also continues to maintain investor confidence through disciplined fiscal policies, bureaucratic reform, and regulatory simplification. These steps create a conducive business climate and strengthen the foundation of the long-term economy, making Indonesia remain attractive in the eyes of global business actors.
*) Economic Observer
