Indonesia’s economy is gaining momentum in the second half of 2025, fueled by robust non-oil exports and strategic government spending. Bank Indonesia (BI) highlights palm oil and steel exports to India and China as key contributors to third-quarter growth. With solid external buffers and targeted fiscal programs, the country is poised for a stronger performance heading into 2026.
Key Facts & Background
- Main growth drivers in Q3 2025:
- Strong non-oil exports (CPO and steel)
- Increased government spending and social assistance
- Key export destinations: India and China
- BI’s full-year 2025 GDP growth projection: Slightly above midpoint of 4.6–5.4% range
- Economic performance in H2 2025: Expected to outperform H1 due to policy support
- Government priorities: Food security, energy resilience, and social protection programs
- BI policy mix:
- Monetary easing
- Macroprudential incentives
- Payment system modernization
- External sector resilience:
- Current account deficit projected lower than earlier estimates
- Foreign exchange reserves at $148.7 billion (Sept 2025), well above 3-month import adequacy
- Portfolio investment trend: Net outflows in Q3 due to global uncertainty
- Outlook for 2026: Improved capital inflows and sustained current account stability expected
Strategic Insights
Indonesia’s economic trajectory in late 2025 reflects a delicate but promising balance between external trade performance and domestic policy execution. The surge in non-oil exports—particularly palm oil and steel—demonstrates the country’s ability to capitalize on commodity demand from major partners like India and China. These sectors not only support GDP growth but also reinforce Indonesia’s strategic relevance in regional supply chains.
Government spending has emerged as a critical lever for stimulating domestic demand. Programs targeting food and energy security, coupled with expanded social assistance in Q4, are expected to boost household consumption and rural incomes. This fiscal push complements BI’s accommodative stance, creating a synergistic policy environment that supports inclusive recovery.
Bank Indonesia’s multi-pronged approach—spanning monetary, macroprudential, and payment system reforms—has helped maintain financial stability while encouraging credit expansion. These measures are particularly important in offsetting the impact of global volatility, which has led to temporary portfolio outflows. Despite this, Indonesia’s external buffers remain robust, with foreign exchange reserves comfortably above international adequacy standards.
The narrowing current account deficit signals improved trade dynamics and reduced vulnerability to external shocks. As global conditions stabilize, BI anticipates a rebound in foreign capital inflows, especially if Indonesia continues to deliver credible growth and reform momentum. This outlook is reinforced by the country’s solid macroeconomic fundamentals and proactive policy coordination.