JAKARTA - Head of Bank Permata economist Josua Pardede predicts Indonesia's economic growth will only be 4.5 percent to 5.0 percent by 2025.
This figure is lower than the initial projection of 5.11 percent.
The Institute for Economic Research (PIER) projects that economic growth throughout 2025 will slow down, lower than the previous target. Increasing trade war uncertainty has prompted companies to delay investment and expansion plans," he said in a statement, Wednesday, May 14.
Therefore, Josua conveyed that his party hopes that the government can respond with more expansionary fiscal policies and on target stimulus so that domestic consumption and investment can move again.
Meanwhile, Indonesia's GDP growth in the first quarter of 2025 was recorded at 4.87 percent year on year (yoy), lower than 5.02 percent in the previous quarter and the slowest rate since the third quarter of 2021.
In addition, the growth in household consumption, which is usually the main engine of the economy, has slightly slowed to 4.89 percent (yoy), which is driven by the weakening of spending power in food & beverage and transportation & communication sub-components.
Furthermore, investment growth or Gross Fixed Capital Formation (PMTB) also decreased to 2.12 percent YoY, mainly due to weakening investment in buildings, structures and machinery and equipment.
On the other hand, government spending contracted 1.38 percent (YoY) after previously boosted by election activities, while exports of goods & services increased with the support of stronger non-oil and gas export performance.
In terms of sectoral, the agricultural sector recorded the highest growth, which was 10.52 percent (YoY), due to the surge in food crop production such as rice and corn.
In addition, the manufacturing sector, which is the backbone of the national economy, grew stably by 4.55 percent, supported by strong export demand in the basic metal industry.
Meanwhile, the retail trade sector recorded a positive growth of 5.03 percent thanks to the momentum of Ramadan, and the service sector also remained solidly supported by sustainable tourism activities.
However, he said that the mining sector contracted due to maintenance activities in gold and copper mines, while the construction sector slowed significantly due to the reallocation of government budgets.
Seeing this trend, he revised Indonesia's economic growth projection in 2025 to below 5 percent, lower than the initial estimate of 5.11 percent.
Global uncertainty due to the ongoing trade war is expected to reduce the rate of investment and domestic consumption.
Josua said that the existence of the trade war would also affect sectoral growth, although the impact would vary.
Sectors with export orientation and relatively high dependence on the US market, such as textiles and garment, skin and footwear, electronics, furniture, and rubber products, will be significantly affected and can reduce the growth of the sector by 2025.
However, he said, domestic market-oriented sectors, such as services and trade, are believed to still be the main motors of growth this year.
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He said the growing concern over the sluggish slowdown in growth could open up space for monetary easing.
"If global uncertainty eases and expectations for the Fed's interest rate drop strengthens, then Bank Indonesia can cut the benchmark interest rate (BI-Rate) to 50 basis points for the remainder of this year," he concluded.
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