Economic growth hits over three-year high in Q4

Economy ends 2025 on a high note: Indonesia's GDP grew 5.4% on a year-on-year basis in Q4, following 5.0% growth in the prior quarter. Q4's reading was the strongest since Q3 2022 and beat market expectations of a softer acceleration. In 2025 as a whole, the economy expanded 5.1%, marginally above 2024’s 5.0% rise and roughly in line with the past-decade average, barring the pandemic-induced downturn in 2020–2021.

Fiscal stimulus boosts domestic demand: Relative to the previous period's data, figures in Q4 improved for private consumption (+5.1% on a year-on-year basis vs +4.9% in Q3), fixed investment (+6.1% vs +5.0% in Q3) and imports of goods and services (+4.0% vs +0.9% in Q3). In contrast, readings softened for government consumption (+4.5% vs +5.7% in Q3) and exports of goods and services (+3.3% vs +9.1% in Q3). Domestically, private spending and fixed investment made up the lion’s share of Q4’s expansion, contributing over 80% to the headline figure. Households consumed at a sharper rate thanks to public stimulus and improving consumer confidence, while fixed investment got a boost from economic diversification efforts and foreign outlays. Meanwhile, the external sector appeared to take a hit from U.S. tariffs and the fading effect of shipment frontloading earlier in the year; exports grew the least in nearly two years.

GDP growth to remain close to trend in 2026: The Indonesian economy should deliver few surprises in 2026: For the fifth year running, GDP growth should hover near the 5.0% mark. Our panelists expect public stimulus to boost domestic demand, largely offsetting a deceleration in exports of goods and services, which will take a hit from U.S. tariffs and softer global demand for Indonesia’s EV-linked commodities. Downside risks to GDP growth include potentially weaker investor sentiment amid fiscal slippage, as well as structural challenges such as persistently high youth unemployment, tepid wage growth and a widening informal economy.

Panelist insight: United Overseas Bank’s Enrico Tanuwidjaja and Vincentius Ming Shen commented: “Indonesia’s economy in 2026 is poised for stronger growth, potentially approaching 6%, driven by investment, technology transfer, and government support. Fiscal risks remain, with the deficit expected to hover near the 3% GDP threshold, but prudent management should preserve market confidence. […] We continue to monitor the speed and consistency of expansionary fiscal spending before making upside revision, if any.” EIU analysts said: “Downside risks to Indonesia’s growth outlook are increasingly tied to democratic and institutional slippage under the presidency of Prabowo Subianto. Recent moves, including aggressive enforcement action in the palm oil sector, the appointment of close relatives to senior policymaking roles and the introduction of a new criminal code that tightens controls on civil liberties, have heightened concerns over governance, regulatory predictability and the independence of Bank Indonesia.”

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