Indonesia’s real GDP is projected to grow by 4.7 percent in 2025 and 4.8 percent in 2026, according to the OECD Economic Outlook 2025.
Inflation is forecast to rise modestly to 2.3 percent in 2025 and 3 percent in 2026, as the depreciation of the rupiah feeds into domestic prices. Although the economy is in a soft patch, easing monetary conditions and public investment are expected to support recovery.
Key details:
- Growth outlook: Economic growth slowed in early 2025 due to weak investment and softening exports, but is expected to pick up in late 2025 as financial conditions ease and sovereign fund disbursements increase.
- Inflation: Declined to 2 percent in April 2025, aided by falling food and energy prices, but expected to climb gradually due to currency depreciation and the end of electricity subsidies.
- Fiscal stance: Neutral in 2025 despite a wider deficit (2.8 percent of GDP) due to offsetting spending cuts; sovereign wealth fund and free meals programme are key new outlays.
- Monetary policy: Bank Indonesia has begun cutting interest rates, from 6.25 percent to 5.5 percent, with further easing expected as inflation stays within the 1.5–3.5 percent target band.
- Risks: External pressures include weaker Chinese demand and potential capital outflows; domestic risks stem from policy uncertainty and regulatory inefficiencies.
Regional comparisons
Vietnam: he OECD projects stronger growth for Vietnam (6.2 percent in 2025) compared to Indonesia (4.7 percent), though Vietnam’s outlook is more vulnerable to global trade tensions and inflationary pressures. Vietnam’s CPI is expected to rise to 3.7 percent, while Indonesia’s remains milder at 2.3 percent.
See also: Vietnam’s growth to moderate amid rising inflation and global uncertainty
Philippines: The Philippines is forecast to grow by 5.6 percent in 2025 and 6.0 percent in 2026, driven by resilient household consumption and a gradual investment recovery. Inflation is projected to ease to 2.0 percent in 2025.