Bank Indonesia Lowers Economic Growth Projection to 4.6-5.4%

TEMPO.CO, Jakarta - Bank Indonesia (BI) estimates Indonesia's economic growth will be between 4.6 and 5.4 percent in 2025. This figure is lower than BI's previous estimate of 4.7-5.5 percent. In the first quarter of 2025, economic growth was recorded at 4.87 percent annually, lower than the 5.02 percent recorded in the fourth quarter of 2024.

"Strengthening various policy responses is necessary to encourage economic growth," said BI Governor Perry Warjiyo at a press conference on Wednesday, May 21, 2025. According to Perry, Indonesia's economic growth is expected to improve in the second semester of 2025, driven by increasing domestic demand, including an increase in government spending.

Perry also claimed that the balance of payments remains stable with increased investments returning in May 2025. Total capital inflows in May amounted to Rp20.63 trillion, supported by stocks and government bonds. BI estimates that the current account deficit in 2025 will be 0.5-1.3 percent of the Gross Domestic Product (GDP).

To boost economic growth, the BI cut the benchmark interest rate from 5.75 percent to 5.50 percent. BI also lowered the deposit facility interest rate to 4.75 percent from the previous 5.00 percent. Furthermore, the lending facility interest rate decreased to 6.25 percent from 6.50 percent.

"First, consider low inflation. Second is the maintained stability of the rupiah exchange rate. Third, it contributes to economic growth," said Perry. He mentioned that the domestic inflation rate is low and within the target of 2.5 plus or minus 1 percent. BI predicts that inflation at the end of the year will be at 2.6 percent.

In the April 2025 edition of the World Economic Outlook, the International Monetary Fund (IMF) reduced Indonesia's economic projection from 5.1 percent to 4.7 percent. "Asian developing countries, especially the Association of Southeast Asian Nations (ASEAN), are among the most affected by the (United States) tariffs," wrote the IMF in its report.

Editor's Choice: Bank Indonesia Slashes Benchmark Interest Rate to 5.50%

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