The Asian Development Bank (ADB) has revised down Indonesia’s economic growth projections, citing global trade tensions and reciprocal tariffs as key headwinds. While domestic fundamentals remain stable, external pressures continue to reshape the outlook for emerging markets across Asia. This recalibration signals the need for adaptive policy strategies to sustain momentum in a volatile global environment.
Key Facts & Background
- In its September 2025 update, ADB downgraded Indonesia’s GDP growth forecast for 2025 from 5.0% (April projection) to 4.9%.
- The 2026 forecast was also trimmed from 5.1% to 5.0%.
- ADB attributes the revision to heightened global trade uncertainty and the impact of reciprocal tariffs imposed by the United States.
- These dynamics are affecting developing economies in Asia and the Pacific, including Indonesia.
- ADB also lowered Indonesia’s inflation forecast for 2025 from 2.0% to 1.7%, while maintaining a 2.0% projection for 2026.
- The Indonesian government’s own assumptions in the 2025 and 2026 state budgets (APBN) are more optimistic, targeting 5.2% and 5.4% growth respectively.
- Regionally, ADB expects Asia-Pacific economies to grow by 4.8% in 2025 and 4.5% in 2026—down from April estimates of 4.9% and 4.7%.
Strategic Insights
ADB’s downward revision of Indonesia’s growth forecast reflects the broader vulnerability of emerging markets to external shocks, particularly those stemming from trade policy shifts among major economies. The rise in reciprocal tariffs, especially from the United States, has disrupted global supply chains and dampened export prospects for countries reliant on trade-driven growth. For Indonesia, which is navigating a complex mix of domestic resilience and external fragility, this adjustment underscores the importance of recalibrating its economic strategy.
The divergence between ADB’s projections and Indonesia’s official budget assumptions reveals a tension between optimism and realism. While the government maintains a bullish stance on growth, international institutions are signaling caution. This gap highlights the need for contingency planning, especially in fiscal policy, investment prioritization, and trade diversification. Policymakers must remain agile, ensuring that budgetary targets are supported by credible execution and responsive measures to global developments.
On the inflation front, the downward revision suggests subdued price pressures, which could offer room for accommodative monetary policy. However, low inflation may also reflect weak demand or delayed investment, requiring a careful balance between stimulus and structural reform. Indonesia’s ability to maintain macroeconomic stability while fostering inclusive growth will be critical in navigating this landscape.
Regionally, the slowdown in Asia-Pacific growth points to a broader deceleration in post-pandemic recovery. Countries across the region are grappling with the dual challenge of sustaining domestic demand while mitigating external risks. For Indonesia, this environment presents both a cautionary tale and an opportunity: by strengthening its internal market, investing in productivity, and expanding trade partnerships beyond traditional corridors, it can build resilience and chart a more independent growth path.