Economic Growth In The First Quarter Of 2025 Is Still Below Target, It Needs Government Breakthrough

Illustration (Photo: Doc. ANTARA)

JAKARTA - Indonesia's economic growth in the first quarter of 2025 recorded a slowdown to 4.87 percent on an annual basis or year on year (yoy) or a decrease compared to the fourth quarter of 2024 of 5.02 percent and 5.11 percent in the first quarter of 2024.

This slowdown was mainly due to a contraction in government spending which recorded a 1.38 percent decline yoy.

Apindo Economic Policy Analyst Ajib Hamdani said this figure is far below the target of economic growth which is a reference in the framework of the 2025 macroeconomics of 5.1 percent to 5.5 percent, but relatively above the world bank projection which only estimates at 4.7 percent.

According to him, the presence of the month of Ramadan and Eid al-Fitr is often the driving force for increasing public consumption so that it can encourage economic growth.

"The increase in the circulation of money reached more than Rp140 trillion. In comparison, economic growth in the first quarter of 2024 reached 5.11 percent, and then economic growth of 5.03 percent on aggregate at the end of 2024," he said in his statement, quoted on Tuesday, May 6.

Ajib said that under the same conditions and there was no breakthrough program from the government, with economic growth in the first quarter of 2025 of 4.87 percent, it would be difficult to achieve economic growth above 5 percent on aggregate by the end of the year.

According to him, this economic growth is under pressure because each factor of economic growth has contracted, such as people's purchasing power which has decreased and the Wave of Termination of Work Relations (PHK) which has continued to occur since the beginning of the year is an indicator that needs to be watched out for so that it is not sustainable.

"The Association of Indonesian Entrepreneurs (Apindo) noted that more than 40 thousand workers have been laid off since the beginning of the year," he explained.

Furthermore, government spending that is under pressure and tax revenue is far from the target, only reaching 14.7 percent until March 2025 from the ideal 20 percent target, and Danantara, which manages BUMN dividends, has eroded the Non-Tax State Revenue (PNBP) sector.

Next, the investment side which tends to be delayed and seen due to fluctuating domestic and global economic conditions and the export and import sector is heavily affected by Trump's tariff policy.

Ajib said to encourage more escalative economic growth, the Indonesian government must encourage low cost economy and policies that are encouraged to duplicate those carried out by the Chinese government in encouraging the domestic economy and its manufacturing industry to have high competitiveness.

"There are at least 4 things that the government can encourage. First, the provision of cheap energy. Second, encourage efficient infrastructure and logistics. Third, economic clustering and business ecosystems. Fourth, encourage labor productivity," he said.

According to him, the four programs are outside of short-term programs and conventional government spending (government spending) optimization.

"To encourage these programs, Apindo proposed the formation of Indonesia Incorporated," he said.

Ajib emphasized the importance of synergy between the government and the business world to ensure the company's sustainability and profitability.

In addition, he conveyed that the business world is expected not only as an economic actor but also as a strategic partner in providing solutions to the nation's problems, being actively involved in deregulation, revitalizing labor-intensive industries and designing pro-policy policies with economic growth and equity.

"If the government focuses on short-term programs as well as the long-term, consolidated economic growth in the first quarter of 2025 could be the foundation for better economic growth," he said.

According to him, there must be a significant breakthrough from the government so that the aggregate economic growth in 2025 is more escalative and reaches a minimum psychological figure of 5 percent by the end of the year.