Indonesian growth unexpectedly jumps 5.12%, defying weak lending
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Gross domestic product in the three months through June rose 5.12% from a year ago, beating expectations of a slowdown to 4.8% growth.
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August 5, 2025
06:53 AM
Fortune
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Finance·IndonesiaIndonesian growth unexpectedly jumps 5.12%, defying weak lendingBy Grace SihombingBy BloombergBy Grace SihombingBy Bloomberg Still, external risks persist due to the worsening trade war and the slower global economy, which could dampen the momentum of domestic demand and trade going forward.Bay Ismoyo—AFP via Getty ImagesIndonesia’s second-quarter growth unexpectedly accelerated to the fastest pace in two years, with exports and investment helping an economy that’s beset by weak loan growth and mass job losses in manufacturing
Gross domestic duct in the three months through June rose 5.12% from a year ago, the nation’s statistics office announced on Tuesday
That beat expectations of a slowdown to 4.8% growth, according to the median estimate in a Bloomberg survey
The rupiah was little changed at 16,384 to the dollar, while stocks increased gains to 1% after the data
Economists were surprised
Outside of the pandemic, the discrepancy between forecast and actual data was the biggest since the first quarter of 2014, according to data compiled by Bloomberg
While the economy may have benefited from interest rate cuts, government stimulus, and the Eid al-Fitr holiday season, analysts are divided over the outlook. “I doubt if the investment growth will be sustained in the second half of the year,” said Ahmad Mikail Zaini, chief economist at PT Sucor Sekuritas in Jakarta, citing slowing loan growth and a contraction in foreign direct investment in June
In contrast, Bank Danamon Indonesia economist Hosianna Evalita Situmorang said third-quarter figures “could continue this imvement,” thanks to government stimulus; spending on free school meals and other jects; supportive monetary policy; and resilient agricultural output
Gross fixed capital formation gained 6.99% in the second quarter, the fastest pace in four years, due to infrastructure development and machinery spending, BPS said
Still, there are also questions over the reliability of the statistics. “We don’t have much faith in the data,” Capital Economics said in a report after the announcement. “We’ve long held concerns the reliability of Indonesia’s GDP data
Before the pandemic, Indonesia went for nearly six years in which official GDP growth barely moved from 5% y/y
And in recent years GDP growth has, again, started to hover around the same rate.” Private consumption, which accounts for over half of the country’s GDP, rose 4.97%. “This remains below the 5.0% trend in the decade before the COVID-19 pandemic—indicating that consumers remain cautious,” Tamara Mast Henderson wrote in a report for Bloomberg Economics, predicting another quarter-point cut in interest rates in the current quarter
Indeed, there have been massive numbers of jobs lost in the textile and other industries as Chinese exporters have dumped goods in the nation of 280 million people
The U.S. imposition of tough tariffs may have added to pressure on Beijing to find new
Southeast Asia’s largest economy expanded 4.04% on a quarterly basis, more than the 3.69% expansion forecast by economists
Exports increased 10.67%, helped by front-loaded shipments ahead of looming U.S. tariffs, which have been reduced to 19% from a threatened 32% for Indonesia
Still, external risks persist due to the worsening trade war and the slower global economy, which could dampen the momentum of domestic demand and trade going forward
The higher tariffs on exports to the U.S. go into effect on Aug. 7
Government spending dropped 0.33% in the second quarter from a year earlier, amid efforts by President Prabowo Subianto to repurpose some state spending to favored grams, including free school lunches
Prabowo is set to unveil the government’s spending plans for 2026 in his first budget speech on Aug. 15, along with the economic growth goal for the year
The government has already lowered the 2025 GDP growth outlook to 4.7%-5%, from an initial 5.2% forecast, and has said more fiscal incentives are being prepared to boost purchasing power through the end of the year
More monetary support is also ly
Since September, Bank Indonesia has lowered its key interest rate by 100 basis points and pledged to continue cutting further to support economic growth and boost bank lending, which dipped to a two-year low in June. “The stronger-than-expected in Indonesia’s second-quarter growth—bolstered by investment and exports—is unly to last,” Bloomberg’s Henderson wrote. “The impact of higher U.S. tariffs has yet to land
When it does, growth will suffer.”
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