Apindo Predicts Modest Economic Growth for Indonesia in 2025

Shinta W Kamdani, the Chairman of the Indonesian Employers' Association (Apindo), has forecasted a modest economic growth for Indonesia in 2025, with predictions indicating a range of 4.9 percent to 5.2 percent. Kamdani emphasized that while the growth rate may not see significant jumps, it is expected to hover around 5.1-5.2 percent, reflecting a steady recovery amid global challenges.

During a press conference on December 19, 2024, Kamdani outlined key factors influencing Indonesia’s economic outlook for the coming year. According to Apindo, several global and domestic conditions are at play, including an unstable global strategic environment, persistent global inflation, and the ongoing pressure on the middle class due to increased VAT on specific goods. These factors collectively contribute to a slower, yet steady economic performance for the country.

The Indonesian economy is also facing potential disruptions in the labor market. Kamdani pointed out that there may be an increase in layoffs, particularly in sectors where the increase in the regional minimum wage (UMP) does not align with productivity growth. Additionally, the end of the commodity boom from palm oil (CPO) and coal may further limit economic growth, adding uncertainty to the domestic economy. The upcoming U.S. presidential election, with its potential impact on global trade and investment, also adds to the unpredictability of the global economy.

Kamdani’s analysis also highlights the distribution of GDP growth across sectors. He predicts that five key sectors will contribute significantly to Indonesia’s GDP in 2025: manufacturing, agriculture, trade, mining, and construction. These industries are expected to remain pillars of the economy, despite challenges in other sectors. However, growth in sectors related to food and drink accommodation, government administration, and other services may see a decline due to the government’s plan to cut official travel costs by 50 percent. This reduction is expected to negatively impact regional Meetings, Incentives, Conferences, and Exhibition (MICE) events, which rely heavily on government spending.

Looking ahead, Kamdani also highlighted two sectors expected to experience rapid growth in the coming years. The digital economy, driven by digital transformation and the expansion of e-commerce, is set to play a significant role in Indonesia’s economic future. Additionally, the green sector, fueled by the country’s commitment to sustainability, will also experience growth as environmental concerns continue to shape business strategies.

In terms of inflation, Kamdani predicts that domestic inflation in Indonesia will remain stable, within a target range of 2.5 percent, with a 1 percent deviation. This stability will be supported by government policies aimed at substituting energy commodities and managing food production through food security programs.

With these insights, Shinta W Kamdani provides a comprehensive forecast for Indonesia’s economy in 2025, pointing to a moderate yet steady growth trajectory, supported by strategic investments in key sectors and sustainable practices.