Indonesia’s economy grew by 5% in 2024, driven by strong domestic demand. Policymakers are urged to enhance coordination amid global uncertainties. Structural reforms are crucial for long-term growth. Analysts highlight the importance of improving infrastructure, streamlining regulations, and fostering innovation to sustain this momentum. Additionally, expanding trade partnerships and boosting investment in renewable energy are seen as key strategies to strengthen economic resilience. As global challenges persist, a balanced approach between fiscal discipline and targeted stimulus will be essential to maintain stability and support inclusive growth.
Economic Stability and Growth in Indonesia
In 2024, Indonesia’s economy experienced solid growth of 5.0 percent, largely driven by robust domestic demand. Inflation remained within the target band of 2.5±1%. However, facing rising global uncertainties in 2025, AMRO urges Indonesian policymakers to strengthen policy coordination to maintain stability and bolster economic activity. Structural reforms are deemed crucial for unlocking the long-term growth potential. Led by AMRO Lead Economist Sumio Ishikawa, the consultation stressed the importance of policy coordination, with discussions highlighting risks and policy measures necessary to support stability and growth.
Effective Policy Strategies
Bank Indonesia (BI) initiated policy measures aimed at balancing stability and growth, including interest rate adjustments and foreign exchange interventions, maintaining the rupiah’s stability. The policy rate was reduced early in 2025 to stimulate growth. The government adopted an expansionary fiscal policy, widening the budget deficit to advance infrastructure projects and new priority programs. These measures included a free nutritious meal program and higher VAT on luxury goods to boost economic momentum. AMRO applauds the planned debt switch and ongoing reforms in tax administration, highlighting the need for fiscal discipline and effective policy implementation.
Challenges and Recommendations
Looking ahead, Indonesia faces short-term challenges, including potential risks from global trade tensions and the policies of the new US administration. AMRO suggests flexible policy recalibration by BI to mitigate such risks. Enhancing revenue mobilization and reallocating spending to infrastructure and human capital development are deemed essential. Structural reforms, especially in economic diversification and supporting local industries, are emphasized for boosting productivity and fostering sustainable growth. AMRO commends Indonesia’s commitment and hospitality during the mission and reiterates the necessity of ongoing regional cooperation to support macroeconomic stability in the ASEAN+3 region.
Source: Strengthening Policy Synergy for Indonesia’s Stability and Growth
