APINDO Predicts Indonesia’s Economic Growth in 2025 Amidst Global and Domestic Challenges
Indonesian Business Group Predicts Moderate Economic Growth in 2025
Jakarta – Indonesia’s economy is expected to grow at a moderate pace in 2025, according to a prediction by the Indonesian Employers Association (APINDO).
APINDO Chairwoman Shinta W. Kamdani stated that the projected growth rate for next year falls between 4.9% and 5.2%, likely leaning towards the higher end of that range.
“Our prediction for next year is between 4.9% and 5.2%, tending towards 5% or slightly above,” kamdani saeid during a press conference at APINDO headquarters in Jakarta on Thursday, December 19, 2024.
Several factors, both global and domestic, are expected to influence this growth.
Global Headwinds and Domestic Challenges
On the global front, sluggish trade and the election of Donald Trump as President of the United states are anticipated to pose challenges.
“This is based on ongoing external pressures such as geopolitical tensions, fragmentation of global trade, the end of the commodity boom for palm oil and coal, global inflation that is starting to be controlled but has not yet returned to normal, and the dynamics in the United States following the election of President Donald Trump,” explained Kamdani.
Domestically, a decline in consumer spending due to the increase in Value added Tax (VAT) to 12% is a key concern.”On the domestic level, the main issues that will substantially affect economic growth next year are the weakening of the middle class, which has traditionally been the backbone of domestic consumption, pressure from the VAT increase on certain goods, and the potential for layoffs due to the increase in the minimum wage that is not matched by increased productivity,” she added.
Middle Class Squeeze and Consumption Slowdown
According to Kamdani, the decline in purchasing power has led to 9.5 million people from the middle class falling into a lower socioeconomic bracket. This is especially worrisome as the Indonesian middle class plays a crucial role in driving national consumption.
Moreover, consumption growth is expected to slow down next year due to the absence of factors that boosted spending in 2024, such as the general election.
“In addition,the lack of growth boosters like the implementation of the General Election with a recurring timeline like this year,could be a challenge for economic growth next year if it only relies on seasonal growth factors,” she explained.
Inflationary Pressures and Rupiah Outlook
APINDO also projects that inflationary pressures will likely increase in the early part of 2025, driven by factors such as the minimum wage increase, the implementation of 12% VAT, and increased seasonal demand in the first quarter related to Ramadan and Eid al-Fitr.
The average exchange rate of the Rupiah against the US dollar in 2025 is predicted to be in the range of Rp 15,800 to Rp 16,350. The Rupiah is expected to remain under pressure in the first half of 2025 due to the strengthening of the US dollar, but is projected to appreciate in the second half as the market adjusts to President Trump’s policies.
Indonesian Economic Growth Expected to be Moderate in 2025
Jakarta – The Indonesian economy is forecast to experience moderate growth in 2025, according to a prediction by the Indonesian Employers Association (APINDO). Chairwoman shinta W. Kamdani stated that the projected growth rate for next year is between 4.9% and 5.2%, likely leaning towards the higher end of that range.
Several factors, both global and domestic, are anticipated to influence this growth trajectory.
Globally, sluggish trade and the election of Donald Trump as President of the United States are expected to present challenges.Domestically, a decline in consumer spending due to the increase in Value Added Tax (VAT) to 12% is a major concern.
Kamdani highlighted the weakening of the middle class, traditionally the backbone of domestic consumption, as a key issue. She also pointed to the potential for layoffs due to the increase in the minimum wage, which hasn’t been accompanied by increased productivity.
The decline in purchasing power has led to 9.5 million people from the middle class falling into a lower socio-economic bracket, according to Kamdani.
Furthermore, consumption growth is expected to slow down next year due to the absence of factors that boosted spending in 2024, such as the general election.
APINDO also projects that inflationary pressure will likely increase in the early part of 2025, driven by factors such as the minimum wage increase, the implementation of 12% VAT, and increased seasonal demand in the frist quarter related to Ramadan and Eid al-Fitr.
The average exchange rate of the Rupiah against the US dollar in 2025 is predicted to be in the range of Rp 15,800 to Rp 16,350. The Rupiah is expected to remain under pressure in the first half of 2025 due to the strengthening of the US dollar, but is projected to appreciate in the second half as the market adjusts to President Trump’s policies.