The Indonesian Economy Grows 5.04 Percent Questioned Amid More Pressured Purchasing Power

Economic Growth (Unsplash)

JAKARTA - The Central Statistics Agency (BPS) revealed that economic growth in the third quarter of 2025 reached 5.04 percent year on year (yoy) when compared to the same quarter in the previous year of 4.95 percent.

On a quarterly basis, Indonesia's economic growth has also slowed down by 1.43 percent (quarter to quarter/qtq). Meanwhile, from January to September 2025 (cumulative-to-cumulative/ctc) the Indonesian economy grew 5.01 percent.

Director of Economic Digital Center of Economic and Law Studies (Celios) Nailul Huda, said that household consumption growth experienced a sharp slowdown from the first and second quarters of 2025.

He added that household consumption growth in the third quarter of 2025 was recorded at 4.89 percent, slightly lower than the first quarter of 2025 of 4.91 percent.

"This means that the purchasing power of households in the third quarter is worse than the beginning of the year. This figure is in line with the consumer confidence index which continues to weaken in the third quarter of 2025," he said in his statement, Wednesday, November 5.

According to him, although household consumption is lower than the first quarter of 2025, economic growth in the third quarter of 2025 is even higher, causing irregularities because household consumption accounts for 53 percent of GDP.

In addition, he said that economic growth in the third quarter of 2025 was supported by the Gross Fixed Capital Formation (PMTB) of 5.04 percent, or lower than the second quarter of 6.99 percent.

Huda assessed that PMTB for machinery and equipment only grew 17 percent, even though related imports only increased 5.48 percent.

Meanwhile, PMTB Machines and equipment are claimed to be the driving force for PMTB growth in the second quarter because imports at that time rose by 22 percent.

"So, it should be questioned why PMTB Machines and Equipment can grow up to 17 percent. In addition, imports of goods and services only grew 1.18 percent in the third quarter of 2025, a significant drop compared to the second quarter of 2025," he explained.

In addition, Huda said that the growth in government spending in the third quarter of 2025 was claimed to reach 5.49 percent, higher than the previous quarter. However, the realization of spending until September 2025 only reached 61.71 percent of the APBN target, or lower than the achievement in the same period in 2024 of 67.72 percent.

"This means that in terms of data, the absorption of the budget is still bad, but the growth in government consumption has increased significantly. It is much higher than in the third quarter of 2024," he explained.

Meanwhile, economic growth in the third quarter of 2025 was largely driven by the service sector, while the manufacturing sector experienced a slowdown compared to the second quarter of 2025, although the Indonesian Manufacturing PMI remained at the expansion level in August and September.

Meanwhile, the service sector is growing rapidly, including education, companies, transportation, and information and communication. This condition causes limited employment opportunities and an open unemployment rate (TPT) to increase to 4.85 percent from 4.76 percent in February 2025, with an additional 180,000 unemployed. This shows quality economic growth.

According to Huda, the fourth quarter of 2025, will be key to the direction of economic growth whether it is like the previous annual cycle, where the quarter is usually driven by government spending.

"The government should focus on restoring people's purchasing power. In the fourth quarter of 2024, household consumption growth is the highest during 2024. It's just a matter of how the government provides more economic stimulus to boost purchasing power," he explained.