Analyst Highlights Causes of Indonesia's Economic Growth Decline

TEMPO.CO, Jakarta - Ajib Hamdani, an Economic Policy Analyst from the Indonesian Employers Association (Apindo), has outlined the causes of Indonesia's economic growth decline in the first quarter of 2025, which registered only 4.87 percent. This figure is notably lower than the 5.11 percent growth seen in the first quarter of last year, which contributed to an aggregate economic growth of 5.03 percent.

Ajib stated that this slowdown is partly triggered by a decrease in consumer spending power, resulting from massive layoffs since the beginning of the year. He mentioned that approximately 70,000 workers were affected by these layoffs in the first quarter of 2025.

"Poverty also increased to 60.3 percent. This condition is in line with the decline in people's purchasing power," Ajib explained in a written statement on Tuesday, June 10, 2025.

Furthermore, Ajib highlighted the government's spending pattern at the beginning of the year, which was less than ideal. Tax revenue, for instance, only reached 14.7 percent of the 20 percent target in the first quarter of 2025. Additionally, the government's efficiency program for spending also negatively impacted economic growth early this year.

In line with these domestic factors, external policies also contributed to the stagnation of Indonesia's economic growth in the first quarter of 2025. Ajib linked this to the economic contraction caused by U.S. President Donald Trump's tariff policy. "This condition has led to a decrease in demand for goods from America. Trump's tariff policy has had a negative impact throughout the second quarter," Ajib noted.

To counter this, Ajib recommended that the government implement a short-term focus from June through the second half of 2025. This could involve an economic stimulus program concentrated on direct cash assistance to boost consumption and enhance purchasing power. "Hopefully, economic growth in the second quarter of 2025 can be higher," he said.

The Organization for Economic Cooperation and Development (OECD) also revised Indonesia's economic growth projection for this year downward, from 4.9 percent to 4.7 percent. Coordinating Minister for Economic Affairs Airlangga Hartarto attributed this reduction to a global impact stemming from the reciprocal tariff war with the United States.

Anastasya Lavenia contributed to the writing of this article.

Editor’s Choice: Reasons Behind OECD's Downgrade of Indonesia's Economic Growth Projection

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