Indonesia posts fastest economic growth rate in 3 years

JAKARTA — Indonesia reported its best economic growth rate in three years in 2025 as the expansion rate accelerated more than expected in the fourth quarter on robust household spending and strong investment, official data showed on Thursday (Feb 5).

For the full year of 2025, Southeast Asia's biggest economy grew 5.11 per cent compared with 5.03 per cent a year earlier. It was the highest annual growth rate since 2022.

The government had set an economic growth target of 5.2 per cent for 2025.

In the fourth quarter, the growth rate was 5.39 per cent compared with the same period a year earlier, above a forecast of 5.01 per cent by analysts in a Reuters poll. Growth of household spending and investment accelerated, according to Statistics Indonesia data. The pace was also the quickest since the third quarter of 2022.

Statistics Indonesia chief Amalia Adininggar Widyasanti said a 16.23 trillion rupiah (S$1.22 billion) stimulus package helped raise household spending and boost growth.

The measures included the distribution of rice to 18.3 million households and the waiving of personal income tax for workers in the tourism sector, among others.

Household spending for all of 2025 grew 4.98 per cent, the fastest since 2019, while investment growth of 5.09 per cent was the highest since 2018.

"The year-end pattern is still clearly visible as government consumption rose sharply compared to the previous quarter, while exports actually fell compared to the third quarter," Bank Permata economist Josua Pardede said.

The government targets 5.4 per cent growth in 2026.

Pardede forecast growth of 5.1 per cent to 5.2 per cent this year, citing global headwinds.

Brian Lee, economist with Maybank, also expected only a marginal pickup in 2026 due to the challenging investment climate, even as President Prabowo Subianto is projected to ramp up government spending.

"The recent market selloff could hit consumer confidence," Lee said, referring to last week's plunge in Jakarta's main equity index triggered by concerns about transparency and liquidity.

The government's takeover of the Martabe gold mine in disaster-hit North Sumatra also could hurt sentiment for direct investment, he said.

The government has also announced a 12 trillion rupiah assistance programme to supply rice and cooking oil over the first quarter this year in a bid to boost first-quarter growth.

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