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Amidst Global Pressures And The Erosion Of The Middle Class, Indonesia's Economy Is Projected To Experience Stagnant Growth

Several institutions project that Indonesia's economy will experience stagnant growth around 5 percent by 2025. External factors, including increasing global pressures and a weakening middle class domestically, pose threats to the government's ambition of achieving 8 percent economic growth.

In its latest forecast published in the "Asian Development Outlook December 2024" report, the Asian Development Bank (ADB) has reiterated its prediction of a 5 percent growth for Indonesia in 2025. This estimate remains unchanged from the conservative figure the institution has maintained for Indonesia since 2023.

In alignment with the ADB, both the World Bank and the International Monetary Fund (IMF) have previously anticipated that Indonesia's economy would grow at a stagnant rate of approximately 5.1 percent. In its most recent report released in October 2024, the IMF projected that Indonesia's economic growth would remain at this level until 2029.

The ADB emphasizes that Indonesia's economic growth will remain at the same level in 2025 due to external risk threats. These include heightened geopolitical tensions, fragmentation of global trade, and evolving dynamics in the United States following Donald Trump's election as president.

"The primary factor influencing Indonesia's growth trajectory will be the global environment. Moreover, Indonesia, like other countries in Asia, is particularly susceptible to the direction of U.S. policies," stated ADB Director for Indonesia Jiro Tominaga during a press conference held in Jakarta on Thursday, December 12, 2024.

He noted that external risks threatening Indonesia's macroeconomic conditions include the potential for prolonged high interest rates in the U.S. following Trump's election. "There is significant uncertainty regarding policy direction after Trump's election, which could impact the trade and financial climate in developing countries," Jiro added.

Tag: Amidst Global Pressures Economic Growth Erosion Of The Middle Class