In the first quarter of 2025, Indonesia had to settle for growth of 4.87%, the lowest level since 2021.
This is bad news for President Prabowo Subianto. In power since October, the latter is aiming for growth of around 8% by the end of his term in 2029. We are far from this, and investors are worried about governance that can be improved, which is far from the reformist voluntarism of his predecessor, the very popular Jokowi.
They also fear that budget deficits are on the rise. Indeed, tax revenues are suffering from the slowdown in exports of raw materials, even as public spending increases. In addition to these fears, there is an uncertain outlook on the foreign trade.
Hope is not lost
However, this is not the time to panic.
While social measures such as free school meals are weighing on public finances, they give a welcome boost to household demand. It is still dynamic and remains the cornerstone of this economy, which still has immense potential. For 2025, it is still expected to grow at around 4.7%. It's hard to find better anywhere else.
We invest in Indonesia as part of our neutral and dynamic portfolios.