Global Risks Still Haunt the Indonesian Economy at the End of 2025

Daftarsbmptn.com – As 2025 approaches, the Indonesian economy remains overshadowed by various global risks that could potentially depress national growth. Although several domestic economic indicators demonstrate relatively good resilience, external pressures such as geopolitical tensions, the global economic slowdown, and commodity price volatility remain serious challenges to national economic stability.

According to the latest data from the Ministry of Finance and Bank Indonesia (BI), Indonesia’s economic growth in the fourth quarter of 2025 is projected to be in the range of 4.9 to 5.1 percent. This figure is still considered positive amidst global uncertainty, but lower than the government’s target of above 5.2 percent growth for this year.

The government believes that external factors, such as declining export demand from China, trade tensions between the United States and the European Union, and fluctuations in global oil prices, are also putting pressure on the national economy. This situation was exacerbated by the weakening rupiah exchange rate against the US dollar, which briefly reached Rp 16,300 per US dollar in early November 2025.

External Pressures and Their Impact on the Domestic Sector

Finance Minister Sri Mulyani Indrawati acknowledged that global pressures remain a major factor affecting national economic stability. “We are in the midst of challenging global dynamics. War in the Middle East, China’s economic slowdown, and high interest rate policies in developed countries are putting pressure on capital flows and exchange rates,” she said at a press conference in Jakarta on Friday (November 8, 2025).

The export sector, which has historically been a pillar of growth, has experienced a significant slowdown. Data from the Central Statistics Agency (BPS) shows that Indonesia’s export value in the third quarter of 2025 fell 3.2 percent compared to the same period the previous year. The largest declines occurred in coal and crude palm oil (CPO) commodities due to weakening global demand.

On the other hand, imports of industrial raw materials remain quite high, reflecting stable manufacturing activity, but putting pressure on the trade balance. As a result, the trade surplus, which has been a major pillar of external stability for the past two years, has begun to decline.

Meanwhile, annual inflation is around 3.4 percent, still within Bank Indonesia’s target range. However, pressure on food and energy prices remains a major concern, especially ahead of the year-end holiday season. The government continues to strive to maintain price stability by strengthening supply and accelerating the distribution of basic necessities in several regions.

Monetary and Fiscal Policy to Maintain Stability

Bank Indonesia continues to strive to stabilize the rupiah exchange rate and maintain market confidence. BI Governor Perry Warjiyo emphasized that his office will maintain a pro-stability monetary policy by maintaining the benchmark interest rate at a level that supports inflation control while maintaining economic growth.

“We remain vigilant against external risks. Rising global interest rates are still restraining foreign capital flows to developing countries, including Indonesia. Therefore, policy coordination with the government is crucial to maintaining stability,” Perry said.

On the fiscal side, the government is continuing its measured expansionary fiscal policy, focusing on increasing productive spending on infrastructure, education, and social protection. The 2025 State Budget (APBN) still recorded a deficit of around 2.5 percent of GDP, below the maximum limit of 3 percent as stipulated in fiscal regulations.

Sri Mulyani added that the 2026 fiscal policy will be formulated more carefully, taking into account the still-high global risks. “We will strengthen fiscal reserves and encourage spending efficiency so that the APBN remains an instrument to support the economy amidst global uncertainty,” she explained.

Domestic Sector Resilience Remains Strong

Despite increasing external pressures, the Indonesian economy is considered to still have strong fundamentals. Household consumption, which contributes more than 50 percent of GDP, remains the main driver of growth. Consumer optimism remains high thanks to controlled inflation and stable purchasing power.

The investment sector is also showing signs of recovery, particularly in manufacturing, renewable energy, and digital technology. Data from the Investment Coordinating Board (BKPM) shows that investment realization from January to September 2025 reached IDR 1,310 trillion, an increase of around 8 percent compared to the same period last year.

The government also continues to promote industrial downstreaming as a long-term strategy to reduce dependence on raw material exports. This step is expected to strengthen the national economic structure and increase domestic added value.

Challenges Next Year and Policy Direction

Economists warn that 2026 will remain a challenging year. The global economic slowdown is expected to continue, especially if geopolitical tensions persist and energy prices remain high. Furthermore, the risks of climate change and disruptions to global supply chains have the potential to trigger new instability.

Tauhid Ahmad, a senior economist at the Institute for Development of Economics and Finance (INDEF), believes the government needs to be more aggressive in strengthening domestic economic resilience. “The key is expanding the industrial base, strengthening food security, and increasing labor productivity. This way, external impacts can be mitigated,” he said.

He also emphasized the importance of coordination between fiscal, monetary, and real sector policies to ensure Indonesia’s continued growth amidst global challenges. “As long as the domestic foundation is strong, we can maintain growth in the 5 percent range, even as global risks increase,” he said.

Looking to the End of 2025 with Caution and Optimism

As 2025 draws to a close, the government remains optimistic that the Indonesian economy can withstand global pressures. Solid investment and consumption performance, coupled with coordinated fiscal and monetary policies, are expected to provide a cushion for the national economy.

Nevertheless, vigilance remains necessary. The government and economic actors must be prepared to respond to changing global conditions, including fluctuating commodity prices and the potential economic downturn of key trading partners.

As stated by Coordinating Minister for Economic Affairs Airlangga Hartarto, “We cannot control the global situation, but we can strengthen domestic resilience. With strong collaboration, Indonesia can continue to grow amidst the storm.”

With various challenges and opportunities, the end of 2025 is a crucial moment for Indonesia to demonstrate its resilience in maintaining national economic stability and sustainability amidst ongoing global pressures.