DIGIVESTASI - APINDO Forecasts Indonesia’s Economic Growth at 4.9%-5.2% in 2025, The Indonesian Employers Association (APINDO) projects that Indonesia’s economic growth in 2025 will range between 4.9% and 5.2%. APINDO Chairperson Shinta W. Kamdani indicated that the growth figure is likely to lean toward the upper range, around 5.1%-5.2%.

“Our projection for next year is 4.9%-5.2%, with a strong likelihood of it settling closer to 5.1%-5.2%,” she stated during a press conference at APINDO’s Jakarta office on Thursday (December 19, 2024).

Global and Domestic Influencing Factors

Shinta explained that the projection is based on a combination of global and domestic factors that will shape Indonesia’s economy in the coming year. On the global front, challenges such as a global trade slowdown, geopolitical tensions, and political dynamics in the United States are significant considerations.

“External pressures remain considerable, including geopolitical tensions, fragmentation in global trade, the end of commodity booms like CPO and coal, as well as global inflation, which, although under control, has not yet returned to normal levels,” Shinta noted.

She further highlighted the potential impact of the U.S. political landscape following Donald Trump’s victory in the presidential election, which has added to global economic uncertainties, indirectly affecting Indonesia.

APINDO: Domestic Consumption Expected to Slow, Driven by VAT Increase and Middle-Class Contraction

Domestically, several factors are anticipated to influence Indonesia’s economic growth in 2025, including the impact of the increase in Value-Added Tax (VAT) to 12%. Shinta stated that declining consumer spending, particularly from the middle class, is a key concern.

“The main domestic factors affecting growth include weakening middle-class purchasing power—which has been a critical driver of consumption—pressure from higher VAT on specific goods, and the potential for layoffs due to increased minimum wages not matched by productivity gains,” she said.

Declining Purchasing Power and Its Impact on National Consumption

Shinta warned that a drop in purchasing power has caused approximately 9.5 million middle-class individuals to fall into a lower economic bracket. This trend poses a serious threat, considering the middle class plays a pivotal role in driving national consumption.

She further explained that consumption in 2025 is predicted to decline compared to the previous year. One key reason is the absence of economic growth drivers like the election-related boost seen in 2024.

“Next year, we won’t have the same growth boosters as in the 2024 election, which provided a seasonal economic lift. This reliance creates a significant challenge,” she remarked.

Inflation and Rupiah Exchange Rate Pressure

APINDO also predicts increased inflationary pressures in early 2025 due to factors such as higher minimum wages, the 12% VAT implementation, and seasonal demand spikes ahead of Ramadan and Eid in the first quarter.

On the exchange rate front, the average rupiah value against the U.S. dollar is expected to range between IDR 15,800 and IDR 16,350 throughout the year. Shinta noted that the rupiah is likely to weaken in the first half of 2025 due to the strengthening U.S. dollar before stabilizing in the second half as markets adjust to policies enacted by the newly elected U.S. President, Donald Trump.

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