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OECD slashes growth forecast for Indonesia to 4.7%
The OECD pointed to sluggish business and consumer confidence, dampened by uncertainty over fiscal policy and persistently high borrowing costs.
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A man uses his phone while waiting for customers at a clothing shop in Tanah Abang Market in Jakarta on March 6, 2025. (AFP/Bay Ismoyo)
T
he Organisation for Economic Cooperation and Development has cut its forecast for Indonesia’s economic growth, citing weakening domestic sentiment and mounting external risks.
The Paris-based institution now expects the country’s gross domestic product to expand by just 4.7 percent this year and 4.8 percent in 2026, down from its March projection of 4.9 and 5 percent, respectively.
In its Economic Outlook report released on Tuesday, the OECD pointed to sluggish business and consumer confidence, which has been dampened by uncertainty over fiscal policy and persistently high borrowing costs. These factors have weighed heavily on household spending and private investment, particularly during the first half of the year.
Official data from Statistics Indonesia showed that the economy grew only 4.87 percent in the first quarter, marking the slowest pace in over three years, while also hovering below the usual 5 percent rate the country has achieved for years.
Looking ahead, the OECD expects domestic demand to rebound in the second half of 2025, supported by easing financial conditions, contained inflation and the rollout of investments from Danantara, Indonesia’s newly established state asset fund.
“Accelerating disbursements from the new fund in the near term, while ensuring transparency and accountability in its management, would support growth in 2025,” the institution stated.
However, rising global trade tensions and falling commodity prices are expected to weigh on external demand.
