Indonesia’s Economy Grows 5.11% in 2025, Missing Target but Gaining Momentum

Annual Performance Overview

Indonesia’s economy expanded by 5.11 percent throughout 2025, according to official data released by the Central Statistics Agency (BPS) on February 5, 2026. The figure represents an acceleration from the 5.03 percent growth recorded in 2024, yet falls short of the government’s ambitious 5.2 percent target established in the State Budget.

BPS chief Amalia Adininggar Widyasanti announced the annual figures during a press conference in Jakarta, describing the expansion as broadly stable despite mounting external pressures.

Cumulatively, Indonesia’s economy throughout 2025 grows by 5.11%,

Amalia stated, noting that the country’s economic output at current prices reached Rp 23,821.1 trillion during the period.

The growth trajectory leaves Southeast Asia’s largest economy in a complex position. While the expansion marks the strongest annual performance since 2022, it underscores the challenges facing President Prabowo Subianto’s administration as it pursues an aggressive goal of reaching 8 percent growth by 2029. GDP per capita in the archipelago nation rose to Rp 83.7 million, equivalent to approximately $5,083, up from Rp 78.6 million in the previous year.

Finance Minister Purbaya Yudhi Sadewa, who assumed office in September 2025 following a cabinet reshuffle that replaced the long-serving Sri Mulyani Indrawati, acknowledged the missed target while emphasizing positive momentum.

What is important is that there is a turnaround of the economy,

Sadewa told reporters, describing the result as the highest growth rate since the third quarter of 2022. He added that the final figure was lower than his estimate, but honestly assessed it as pretty good given the circumstances.

Quarterly Momentum Builds Toward Year-End

Economic activity gathered significant steam as 2025 progressed, with the fourth quarter delivering the strongest performance of the year. GDP expanded by 5.39 percent year-on-year in the October-to-December period, surpassing analyst expectations of around 5.01 percent and representing the fastest quarterly growth in over three years.

The quarterly progression reveals a volatile yet ultimately upward trajectory. The year began modestly with 4.87 percent growth in the first quarter, which actually represented a 0.98 percent contraction compared to the final quarter of 2024 as seasonal factors and post-holiday adjustments took effect. Agriculture, forestry, and fishing provided the primary support during this period with 10.52 percent growth.

The second quarter surprised markets with an unexpected acceleration to 5.12 percent, driven by exports and investment despite weak loan growth and manufacturing job losses. This figure sparked significant controversy among economists who questioned the reliability of the investment data, which reportedly jumped 6.99 percent. The third quarter moderated slightly to 5.04 percent, with electricity and gas leading production-side growth at 5.42 percent.

The fourth-quarter rebound was fueled by a Rp 16.23 trillion ($965 million) stimulus package that included rice distribution to 18.3 million households, tax waivers for tourism sector workers, and transportation subsidies. Household spending, which constitutes more than half of Indonesia’s GDP, grew 5.11 percent in the final quarter, the fastest pace in over two years. For the full year, household consumption rose 4.98 percent, marking the strongest performance since 2019.

Manufacturing Powers Growth as Mining Contracts

From a sectoral perspective, the industrial landscape presented a mixed picture in 2025. Manufacturing remained the dominant engine of economic activity, contributing 19.07 percent to total GDP while posting robust expansion across multiple quarters. The sector grew 5.68 percent year-on-year in the second quarter, according to BPS data, supported by infrastructure development and machinery spending.

Trade followed as the second-largest contributor at 13.17 percent of GDP, with agriculture closely behind at 13.1 percent. Construction accounted for 9.83 percent of economic output, while mining contributed 8.75 percent despite being the only major sector to experience contraction during the year. Mining output fell by 0.66 percent amid softer commodity prices and reduced extraction activity.

The fastest-growing industries reflected evolving domestic demand patterns. Corporate services expanded by 9.01 percent, while transportation and warehousing grew 8.87 percent, indicating stronger mobility and logistics demand as business activity normalized. Education emerged as a standout performer in the third quarter with 10.59 percent growth, while other services activities led cumulative growth through September at 10.37 percent.

Investment growth reached 5.09 percent for the full year, the highest level since 2018, driven by gross fixed capital formation gains of nearly 7 percent in the second quarter. However, these figures attracted skepticism from independent economists who noted that bank lending growth remained sluggish and foreign direct investment appeared flat, creating discrepancies between official statistics and financial market indicators.

Regional Divide Persists Despite Bali’s Strong Recovery

Geographic economic disparities remained pronounced throughout 2025, with Java Island continuing to dominate the national economy. The island, home to the capital Jakarta and major industrial centers, contributed 56.93 percent of national GDP while posting 5.17 percent growth. This concentration highlights the persistent development gap between Indonesia’s western heartland and its eastern regions.

Sumatra followed as the second-largest contributor with a 22.22 percent share, while Kalimantan accounted for 8.12 percent and Sulawesi 7.22 percent. Eastern regions including Bali and Nusa Tenggara contributed just 2.82 percent, with Maluku and Papua adding 2.69 percent, illustrating the ongoing challenges in distributing economic activity across the sprawling archipelago.

However, Bali provided a notable exception to eastern underperformance, recording 5.82 percent growth in 2025, its highest rate in seven years and significantly outpacing the national average. Bali BPS Chief Agus Gede Hendrayana Hermawan confirmed the figure represented a full recovery from the pandemic downturn.

Based on data, it stood at 5.82 percent, the highest in the last seven years,

he stated in Denpasar. The island’s economy reached Rp 177.99 trillion (approximately $10.5 billion), surpassing its pre-pandemic level of 5.60 percent growth recorded in 2019.

Accommodation and food services remained the dominant sector in Bali, contributing 22.27 percent to the island’s regional GDP. Household consumption drove the recovery, accounting for 52.52 percent of the island’s economic activity with 5.47 percent cumulative growth. Regional officials declared that Bali’s economy has fully recovered from the COVID-19 pandemic, which had caused severe contractions of 9.34 percent in 2020 and 2.46 percent in 2021.

Economists Question Official Data Integrity

While government officials celebrated the 2025 growth figures, significant skepticism emerged from independent economists and research institutions regarding the veracity of certain data points. The debate intensified following the release of second-quarter statistics showing an unexpected surge in investment activity that appeared disconnected from other economic indicators.

Mohammad Faisal, Executive Director of the Center of Reform on Economics (CORE) Indonesia, was among the most vocal critics regarding the reported 6.99 percent year-on-year increase in second-quarter investment.

That level of investment is similar to pre-pandemic conditions. At the same time, we’re seeing various investor concerns about policy uncertainty and government effectiveness. So the jump is unexpected,

Faisal stated, highlighting the apparent contradiction between reported capital formation and declining business confidence surveys.

Bhima Yudhistira, Executive Director of the Center for Economic and Legal Studies (CELIOS), went further, accusing the government of manipulating economic data to align with political narratives.

The narrative seems to be built toward fulfilling a political promise, not reflecting economic realities,

he told Reuters, suggesting the statistics were engineered to demonstrate early progress toward Prabowo’s 8 percent growth target. CELIOS formally requested that the UN Statistics Division conduct a technical diagnostic review of Indonesia’s GDP calculation framework.

Tauhid Ahmad, senior economist at the Institute for Development of Economics and Finance (Indef), raised specific concerns about the Gross Fixed Capital Formation (PMTB) calculations.

PMTB covers capital expenditures like machinery, equipment, and buildings. But investment credit growth is currently slowing, both from the public and private sectors. This suggests the reported numbers may not align with actual investment conditions,

he explained, pointing to banking data showing reduced lending activity.

Former Finance Minister Sri Mulyani Indrawati defended BPS against these accusations during her final months in office, emphasizing the agency’s adherence to international standards.

BPS has explained in detail the methodology, data sources, and the data they produce. I believe BPS maintains its integrity,

she stated in August 2025. Capital Economics remained unconvinced, noting in reports that Indonesia’s GDP growth had historically hovered around 5 percent with suspicious consistency, stating

We don’t have much faith in the data. We’ve long held concerns about 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.

Government Stimulus and Prabowo’s Ambitious Targets

The 2025 growth figures emerge against a backdrop of significant policy shifts under the Prabowo administration, which took office in October 2024. The government implemented substantial fiscal stimulus measures totaling approximately $1.5 billion, including transport subsidies, toll discounts, and expanded social aid programs designed to boost household purchasing power.

These measures formed part of a broader strategy to accelerate growth toward the president’s stated goal of reaching 8 percent expansion by the end of his term in 2029. The administration has prioritized programs including free nutritious meals for schoolchildren, Red and White village cooperatives, and downstream processing of natural resources through the newly established sovereign wealth fund Danantara.

The fiscal strategy involved a notable pivot from the conservative approach of former Finance Minister Sri Mulyani to the more expansionary stance of her successor Purbaya Yudhi Sadewa, an economist favoring growth-oriented policies. This transition triggered market volatility, including capital outflows that sent the rupiah to historic lows against the US dollar and prompted concerns about fiscal sustainability.

Trade dynamics complicated the growth picture throughout 2025. Indonesia maintained a substantial trade surplus of $41.05 billion for the year, yet the contribution of net exports to overall growth remained limited as imports of capital goods and raw materials increased alongside domestic investment activity. Front-loaded exports in the second quarter helped offset the impact of US tariffs, which were eventually reduced to 19 percent from an initially threatened 32 percent.

Bank Indonesia supported growth through aggressive monetary easing, cutting the benchmark interest rate by 150 basis points between September 2024 and September 2025. Governor Perry Warjiyo indicated that additional cuts remained possible as the central bank sought to stimulate bank lending, which had declined to two-year lows.

2026 Outlook Navigates Global Headwinds

Looking ahead, economists project that Indonesia’s economy will expand between 5.1 percent and 5.4 percent in 2026, broadly maintaining the growth trajectory established in 2025. The government’s official target stands at 5.4 percent, with Finance Minister Sadewa expressing optimism that acceleration to 6 percent remains achievable through coordinated fiscal, financial, and investment policies.

The Chamber of Commerce and Industry (Kadin) shares this relatively bullish outlook, forecasting 5.4 percent growth driven by stronger domestic consumption, resilient trade performance, and rising investment supported by Danantara. However, several analysts warn that achieving even this modest acceleration faces substantial obstacles.

External risks dominate the downside scenario. Josua Pardede, chief economist at Permata Bank, cautioned that global trade tensions and slowing international demand could undermine export performance.

The 2026 outlook could improve if global pressures ease and market confidence strengthens. However, there are downside risks if global trade tensions intensify and the twin deficits widen,

he warned, referring to potential deterioration in both fiscal and current account balances.

Domestic challenges include recent market turbulence triggered by MSCI’s threatened downgrade of Indonesian equities due to transparency concerns, which caused the Jakarta stock index to suffer its worst crash in decades. Additionally, administrative actions in the resources sector, including the government takeover of the Martabe gold mine, have raised concerns about investment sentiment and property rights.

ANZ economist Krystal Tan characterized the fourth-quarter 2025 rebound as solid but noted that it followed a shift in fiscal policy stance. The sustainability of consumption-driven growth remains uncertain given sluggish labor market conditions and declining tax revenues that appear inconsistent with reported high household spending levels. As global trade uncertainties persist, Indonesia’s economic trajectory in 2026 will depend heavily on the effectiveness of government stimulus programs and the ability to maintain investor confidence amid ongoing questions about data reliability.

The Essentials

• Indonesia’s economy grew 5.11% in 2025, up from 5.03% in 2024 but below the 5.2% government target
• Fourth-quarter growth reached 5.39%, the fastest pace since Q3 2022, driven by stimulus measures and household spending
• Manufacturing remained the largest sector contributor at 19.07% of GDP, while mining contracted 0.66%
• Java Island dominated with 56.93% of national GDP, though Bali outperformed with 5.82% growth
• Independent economists questioned data integrity, particularly regarding investment figures showing 6.99% growth in Q2
• 2026 growth projections range from 5.1% to 5.4%, with the government targeting 5.4% amid global trade uncertainties