CSIS Highlights Indonesia's 'Overcast' Economic Outlook as Growth Drops Below 5%

TEMPO.CO, Jakarta - Senior Researcher at the Center for Strategic and International Studies (CSIS), Deni Friawan, has described the Indonesian economy as being "overcast," as economic growth slipped under 5 percent in the first quarter of 2025, with only 4.87 percent year-on-year.

According to Deni, the first six months of Prabowo and Vice President Gibran Rakabuming's administration will be crucial to determining the path of Indonesia's economic prospects. "Our current conclusion is that the economy is not yet completely dark, but is overcast," he said during a CSIS media briefing held on Wednesday, May 7, 2025.

In the previous quarter, or the fourth quarter of 2024, Indonesia's economic growth reached 5.03 percent, which was a decline from the first quarter of 2024 with 5.11 percent. The economic slowdown occurred amid seasonal factors, namely the holy month of Ramadan, which usually boosts the economy.

CSIS noted that the Indonesian economy in the first quarter of 2025 contracted by 0.98 percent compared to the previous quarter. From the side of demand, according to Deni, this was caused by the weakening of household consumption, which only rose by 4.89 percent. "We know that household consumption accounts for more than 55 percent of our total GDP (gross domestic product)."

The slowdown also occurred in government spending, which decreased by 1.42 percent. Meanwhile, from the production side, the sluggish growth was driven by the stagnant trade sector, as well as transportation and communication. Meanwhile, the agricultural sector is up significantly by 10.52 percent.

Inflation data also continued to decelerate, indicating disinflation. The lowest level even reached a deflation of 0.09 percent in February 2025.

Another indicator, according to Deni, is the labor market. The Ministry of Manpower's data stated that from the beginning of the year until April 2025, the number of layoffs reached 24,000, while the Indonesian Employers' Association mentioned an even higher figure of 40,000. 

According to Deni, with the current economic state, it is not surprising that consumer and business confidence continues to decline. He cited that at the beginning of Prabowo's administration, consumer confidence rose from 121 to 127. But now it has dropped back to just 121.

Similarly, the manufacturing index, or Purchasing Managers' Index (PMI), has dropped below 50 or experienced a contraction. "From the overview of the data we have presented, we can conclude that our economy is not yet under pouring rain, but the clouds are already there. If there is no anticipation of improvement from the government, darkness will become inevitable," said Deni.

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