Indonesia Grew 5.11% in 2025 as Late Surge Fell Short of Budget Target

A stronger finish leaves Indonesia below its growth goal

Indonesia's economy grew 5.11 percent in 2025, accelerating from 5.03 percent in 2024 but missing the State Budget target of 5.2 percent, according to figures released by the Central Statistics Agency (BPS) on February 5, 2026. A stronger final quarter helped Southeast Asia's largest economy gain momentum as President Prabowo Subianto pursued his goal of 8 percent growth by 2029.

BPS chief Amalia Adininggar Widyasanti announced the results at a press conference in Jakarta, describing growth as broadly stable despite mounting external pressures. She gave the annual result:

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

Indonesia's economic output at current prices reached Rp 23,821.1 trillion. GDP per capita rose from Rp 78.6 million in 2024 to Rp 83.7 million, equivalent to approximately $5,083. GDP measures the value of goods and services produced in an economy; GDP per capita divides that total by the population.

The annual growth rate was the strongest since 2022. Yet the improvement over 2024 was just 0.08 percentage points, while the gap against the budget target was 0.09 percentage points. The distance between the 2025 result and Prabowo's ambition for 2029 remained much larger, at 2.89 percentage points.

Finance Minister Purbaya Yudhi Sadewa acknowledged that growth had missed the target and come in below his own estimate. Nevertheless, he described the result as pretty good given the circumstances and stressed the improvement in economic activity:

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

Sadewa also described the latest growth performance as the highest since the third quarter of 2022. The stronger finish supplied the government with encouraging figures, even as questions about investment data and the durability of household spending continued.

How growth changed through the year

Indonesia ended 2025 with growth of 5.39 percent in the October to December quarter compared with the same period a year earlier. That exceeded analyst expectations of around 5.01 percent and marked the fastest quarterly growth in more than three years.

The annual path was uneven. An initially modest expansion gave way to a surprise acceleration, a slight slowdown and then the strongest quarter of the year:

• First quarter of 2025: GDP grew 4.87 percent from a year earlier but contracted 0.98 percent compared with the final quarter of 2024, reflecting seasonal factors and adjustments after the holidays. Agriculture, forestry and fishing supplied the main support, growing 10.52 percent.
• Second quarter of 2025: Growth accelerated unexpectedly to 5.12 percent, supported by exports and investment despite weak lending growth and manufacturing job losses. Investment rose 6.99 percent, a figure that drew challenges from economists.
• Third quarter of 2025: Growth eased to 5.04 percent. Electricity and gas led growth on the production side at 5.42 percent, while education recorded growth of 10.59 percent.
• Fourth quarter of 2025: Growth climbed to 5.39 percent as government support and stronger household spending helped activity gather pace.
• February 5, 2026: BPS released the annual figures showing growth of 5.11 percent for 2025.

The quarterly comparisons measure different things. Growth from a year earlier compares a quarter with the same season in the previous year. Growth from the preceding quarter measures the immediate change in activity. Indonesia could therefore record annual growth in the first quarter while producing less than in the final three months of 2024.

Household spending responds to government support

A stimulus package worth Rp 16.23 trillion, approximately $965 million, supported the rebound in the fourth quarter. It included rice distribution to 18.3 million households, tax waivers for tourism workers and transportation subsidies.

Household spending, which makes up more than half of Indonesia's GDP, grew 5.11 percent in the final quarter. That was its fastest pace in more than two years. Across 2025, household consumption increased 4.98 percent, its strongest performance since 2019.

The government also implemented broader fiscal stimulus measures totaling approximately $1.5 billion during 2025. Transport subsidies, toll discounts and expanded social assistance were intended to support purchasing power, giving families more room to spend and reducing some travel costs.

Household consumption matters because of its large place in the economy. When families buy more goods and services, businesses receive more revenue and demand can spread to suppliers, transport operators and other employers. The late improvement in spending helped explain why growth strengthened toward December.

ANZ economist Krystal Tan described the fourth quarter rebound as solid and noted that it followed a change in the government's fiscal policy stance. Sluggish labor market conditions and declining tax revenues, however, appeared inconsistent with the strength of reported household spending. Those conditions left uncertainty about how long consumption could sustain the faster pace.

Manufacturing leads while mining shrinks

Manufacturing remained Indonesia's largest economic sector, accounting for 19.07 percent of GDP in 2025. It expanded across multiple quarters, including growth of 5.68 percent from a year earlier in the second quarter, supported by infrastructure development and spending on machinery.

Trade accounted for 13.17 percent of GDP, followed closely by agriculture at 13.1 percent. Construction contributed 9.83 percent, while mining represented 8.75 percent. Mining was the only major sector to contract during the year, shrinking 0.66 percent amid softer commodity prices and reduced extraction activity.

Corporate services grew 9.01 percent, and transportation and warehousing expanded 8.87 percent. Those increases reflected stronger demand for business services, movement and logistics as business activity normalized. Other services activities led cumulative growth through September at 10.37 percent.

Investment grew 5.09 percent for the full year, the strongest rate since 2018. Gross fixed capital formation increased by nearly 7 percent in the second quarter. This measure, known in Indonesia as PMTB, tracks spending on assets such as machinery, equipment and buildings that are used in production over time.

Independent economists questioned the investment figures because bank lending growth remained sluggish and foreign direct investment appeared flat. Their concerns centered on the gap between the reported increase in capital formation and financial indicators that suggested a less vigorous investment environment.

Java dominates as Bali records a stronger recovery

Java, home to Jakarta and major industrial centers, generated 56.93 percent of national GDP and grew 5.17 percent in 2025. Its share showed how heavily economic activity remained concentrated in Indonesia's western heartland.

Sumatra contributed 22.22 percent of national GDP, Kalimantan 8.12 percent and Sulawesi 7.22 percent. Bali and Nusa Tenggara together accounted for 2.82 percent, while Maluku and Papua contributed 2.69 percent. Java and Sumatra therefore produced a combined 79.15 percent of national output, compared with 5.51 percent for the two smallest regional groupings.

Bali nevertheless grew faster than the national economy. Its expansion of 5.82 percent was the highest in seven years and exceeded the national rate by 0.71 percentage points. Bali BPS chief Agus Gede Hendrayana Hermawan confirmed the result in Denpasar:

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

Bali's economy reached Rp 177.99 trillion, approximately $10.5 billion. Its growth rate also surpassed the 5.60 percent recorded in 2019, before the pandemic. Accommodation and food services remained its largest sector, contributing 22.27 percent of regional GDP.

Household consumption accounted for 52.52 percent of Bali's economy and grew 5.47 percent over the year. Regional officials declared that the island had fully recovered from the COVID-19 pandemic, following contractions of 9.34 percent in 2020 and 2.46 percent in 2021.

Bali's recovery and Java's large economic share illustrated two different features of the national picture: some smaller regional economies were growing quickly, while most production remained concentrated in the largest western islands.

Why economists challenged the investment numbers

The debate over data intensified after the second quarter figures showed investment increasing 6.99 percent from a year earlier. Critics questioned how that increase fitted with weak credit growth, manufacturing job losses, flat foreign direct investment and declining business confidence surveys.

Mohammad Faisal, executive director of the Center of Reform on Economics (CORE) Indonesia, said the reported increase was difficult to reconcile with concerns among investors about policy and government performance:

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,

Tauhid Ahmad, senior economist at the Institute for Development of Economics and Finance (Indef), focused on the calculation of gross fixed capital formation. He pointed to reduced lending activity as a reason to question the reported strength of capital spending:

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,

Bhima Yudhistira, executive director of the Center for Economic and Legal Studies (CELIOS), made a more serious allegation, accusing the government of manipulating economic data to fit political promises. He linked his criticism to Prabowo's goal of reaching 8 percent growth:

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

CELIOS formally asked the UN Statistics Division to conduct a technical diagnostic review of Indonesia's GDP calculation framework. No outcome or timetable for that requested review was given.

Capital Economics also expressed longstanding doubts about the reliability of the figures, pointing to the unusually steady pace of reported growth before the pandemic:

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.

Former finance minister Sri Mulyani Indrawati defended BPS in August 2025, during her final months in office. She said the agency followed international standards and had explained how it produced its statistics:

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

The dispute placed the government's positive reading of the economy alongside explicit challenges from named economists. BPS's published figures remained the official measure of growth, while the critics sought closer examination of the calculations, particularly investment.

A policy shift behind the push toward 8 percent

Prabowo's administration, which took office in October 2024, sought to accelerate the economy through public spending, investment and programs intended to support households. Its priorities included free nutritious meals for schoolchildren, Red and White village cooperatives and downstream processing of natural resources through the newly established sovereign wealth fund Danantara.

Downstream processing means turning raw materials into products with more processing before they are sold. The administration placed that approach within its broader effort to generate investment and move growth toward 8 percent by the end of Prabowo's term in 2029.

Sadewa took over the finance ministry in September 2025 after a cabinet reshuffle replaced Sri Mulyani, who had held the role for many years. The transition marked a shift from her more conservative fiscal approach toward his preference for policies aimed at faster growth.

The change also triggered market volatility. Capital outflows sent the rupiah to historic lows against the US dollar, while investors raised concerns about fiscal sustainability, meaning the government's ability to keep financing its spending commitments.

Bank Indonesia supported activity by cutting its benchmark interest rate by 150 basis points between September 2024 and September 2025. That amounts to a reduction of 1.5 percentage points. Lower benchmark rates are intended to make borrowing less expensive and encourage spending and investment.

Bank Indonesia Governor Perry Warjiyo indicated that further cuts remained possible as the central bank sought to stimulate lending. Bank lending growth had fallen to its lowest level in two years, making the transmission of policy support into actual borrowing an important part of the government's growth effort.

Trade surplus meets tariff pressure

Indonesia recorded a trade surplus of $41.05 billion in 2025, meaning the value of its exports exceeded that of its imports by that amount. Yet net exports made only a limited contribution to economic growth because imports of capital goods and raw materials also rose alongside domestic investment activity.

Capital goods include equipment used to produce other goods and services. More purchases of such equipment from abroad can support investment while also increasing imports, reducing the amount that trade adds directly to GDP growth.

Exporters brought shipments forward in the second quarter to help offset the effect of US tariffs. The tariff rate was eventually reduced to 19 percent from an initially threatened 32 percent, leaving trade policy as a continuing concern despite the lower rate.

The export boost helped support the second quarter acceleration, but the broader outlook depended on international demand as well as domestic spending. Indonesia entered 2026 facing uncertainty about both global trade tensions and the strength of overseas markets.

What the 2026 forecasts depend on

Economists projected growth of between 5.1 percent and 5.4 percent in 2026. The government's official target was 5.4 percent, while Sadewa expressed optimism that coordinated fiscal, financial and investment policies could lift growth to 6 percent.

The Chamber of Commerce and Industry (Kadin) also forecast 5.4 percent growth. It expected stronger domestic consumption, resilient trade and rising investment supported by Danantara. Reaching the government's target would require an acceleration of 0.29 percentage points from the 2025 result.

Josua Pardede, chief economist at Permata Bank, warned that global trade tensions and weaker international demand could weigh on exports. He described the conditions for improvement and the risks:

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,

The twin deficits refer to the fiscal balance and the current account balance. A fiscal deficit arises when government spending exceeds revenue. The current account records trade in goods and services alongside income and transfers between a country and the rest of the world.

Domestic market turbulence added to the risks. MSCI threatened to downgrade Indonesian equities because of transparency concerns, helping trigger the Jakarta stock index's worst crash in decades. Administrative action in the resources sector, including the government takeover of the Martabe gold mine, also raised concerns about investment sentiment and property rights.

Indonesia's stronger finish to 2025 therefore left the government with both momentum and unfinished work. Growth in 2026 depended heavily on the effectiveness of stimulus, the response of lending and investment, and the ability to maintain investor confidence amid continuing questions about data reliability and uncertainty over global trade.

The Essentials

• Indonesia grew 5.11 percent in 2025, compared with 5.03 percent in 2024 and a budget target of 5.2 percent.
• Fourth quarter growth reached 5.39 percent, exceeding expectations of around 5.01 percent.
• Household consumption grew 4.98 percent for the year, its strongest performance since 2019.
• Manufacturing contributed 19.07 percent of GDP, while mining output contracted 0.66 percent.
• Java generated 56.93 percent of national GDP. Bali grew 5.82 percent, its fastest rate in seven years.
• Economists challenged the reported 6.99 percent investment increase in the second quarter. Sri Mulyani defended BPS's methods and integrity.
• Indonesia recorded a trade surplus of $41.05 billion, while Bank Indonesia cut rates by 150 basis points between September 2024 and September 2025.
• The government targeted 5.4 percent growth in 2026 and continued to pursue 8 percent by 2029.