Indonesia’s Economic Growth Slows to Nearly Four-Year Low on Weak Consumer Spending

Indonesia’s economy likely expanded at its slowest pace in nearly four years in the second quarter of 2025, as sluggish household spending offset gains from stronger exports, according to a Reuters poll of economists. The survey, conducted from July 25 to August 1 among 26 economists, estimated GDP growth at 4.80% year-on-year for April–June, down slightly from 4.87% in the first quarter. Official figures will be released Tuesday.

On a quarterly basis, GDP likely rebounded 3.70% after a 0.98% contraction in January–March. Economists point to waning consumer confidence, stagnant real wages, slowing industrial activity, and high youth unemployment as key drags on domestic demand. Retail sales fell 0.3% in April and rose just 1.9% in May, signaling muted consumption.

To support growth, the government announced a 24 trillion rupiah ($1.5 billion) stimulus in June, including cash handouts and transport subsidies. While exports jumped 11.29% in June, driven partly by accelerated shipments ahead of a proposed U.S. tariff hike (later reduced from 32% to 19%), analysts warn of indirect risks from weaker global trade and tariffs impacting Indonesia’s key partners.

Only 10% of Indonesia’s exports go directly to the U.S., but the ripple effects of trade tensions could pressure growth in the months ahead. Bank Indonesia cut interest rates last month to counter soft domestic demand and sluggish global trade, with Governor Perry Warjiyo signaling openness to further easing if needed.

A separate Reuters poll projects Indonesia’s economic growth at an average of 4.8% in 2025, near the lower bound of the central bank’s 4.6%–5.4% forecast range. This remains far from President Prabowo Subianto’s ambitious target of 8% annual growth during his five-year term, which began last year.