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Economic Outlook for 2025 Revised Down to 4.7–5%, Government Prepares Stimulus

The Ministry of Finance has set the 2025 economic growth outlook at a range of 4.7% to 5%, lower than the 5.2% target set in the 2025 State Budget (APBN). To maintain growth close to 5%, the government plans to accelerate priority spending and employ counter-cyclical fiscal instruments. Several strategic programs—such as the Free Nutritious Meals (MBG) initiative, FLPP housing subsidies, and the People’s School (Sekolah Rakyat)—will be further strengthened, as they are deemed to have a multiplier effect on purchasing power and the broader economy.

– Kontan, July 1, 2025

 

June 2025 Manufacturing PMI Drops to Lowest Level Since the Pandemic

Indonesia’s manufacturing sector weakened further in June 2025, with the Manufacturing Purchasing Managers’ Index (PMI) falling to 46.9, down from 47.4 in May. This figure remains below the neutral threshold of 50.0, indicating continued contraction. The decline was mainly driven by a sharp drop in domestic demand, marking the worst contraction since August 2021. While exports remained relatively stable, they were insufficient to offset the overall sales decline.

As a result, companies undertook efficiency measures, including workforce reductions and restrained purchasing activity. Although raw material price increases were moderate, producers held back on raising selling prices to maintain competitiveness.

– Kontan, July 1, 2025

 

6% Growth Target for 2026, Sri Mulyani Highlights Consumption and Investment

In response to the House of Representatives’ (DPR) push for a higher economic growth target of 6% year-on-year in 2026, Finance Minister Sri Mulyani emphasized the need to strengthen household consumption and investment as key drivers.

To achieve this target, household consumption must grow by at least 5.5% year-on-year, up from 4.89% in Q1 2025. The government plans to boost purchasing power through strategic programs such as the Free Nutritious Meals (MBG) initiative, the Merah Putih Village Cooperatives, disbursement of People’s Business Credit (KUR), and various social assistance schemes.

Meanwhile, investment is targeted to grow by 5.9% year-on-year, requiring an additional investment of IDR 7,500 trillion in 2026. Since consumption and investment together account for 85% of GDP, their performance will be the key determinant in achieving the growth target.

– Kontan, July 1, 2025

 

May 2025 Trade Balance Posts US$ 4.3 Billion Surplus, Driven by Non-Oil & Gas Sector

Indonesia’s trade balance recorded a surplus of US$ 4.30 billion in May 2025, according to Statistics Indonesia (BPS). The surplus was primarily driven by the non-oil and gas sector, which posted a US$ 5.83 billion surplus, while the oil and gas sector continued to post a deficit of US$ 1.53 billion.

Cumulatively from January to May 2025, the trade surplus reached US$ 15.38 billion—higher than in the same period last year. Exports grew by 6.98% year-on-year to US$ 111.98 billion, while imports rose by 5.45% year-on-year to US$ 96.60 billion.

Top contributors to the non-oil and gas surplus included:

  • Animal/vegetable fats and oils (HS 15) – US$ 12.44 billion
  • Mineral fuels (HS 27) – US$ 11.51 billion
  • Iron and steel (HS 72) – US$ 7.53 billion

The oil and gas deficit was mainly due to high imports of crude oil and refined petroleum products. The largest contributors to the overall trade deficit included:

  • Machinery and mechanical appliances – US$ 10.76 billion
  • Electrical equipment – US$ 4.53 billion
  • Plastics and plastic articles – US$ 3.13 billion

– Kontan, July 2, 2025

 

Ministry of Finance Unblocks IDR 134.9 Trillion to Accelerate Spending and Support Priority Programs

The Ministry of Finance has unblocked IDR 134.9 trillion in budget allocations for Ministries/Agencies (K/L) as of June 2025 to accelerate state spending. This policy follows Presidential Instruction (Inpres) No. 1 of 2025, which previously emphasized spending efficiency at both the national and regional levels.

Finance Minister Sri Mulyani stated that the budget unblocking is focused on supporting national priority programs. A total of 23 ministries/agencies unblocked IDR 48 trillion, while 76 others released IDR 6.9 trillion. The move was initiated by the Finance Minister and approved by President Prabowo.

– Kontan, July 1, 2025

 

IDR 2,000 Trillion in Stalled Investment, BKPM Pushes for Licensing Reform and Legal Certainty

Despite meeting its annual investment realization targets, Indonesia’s investment climate still faces structural and regulatory challenges, according to the Ministry of Investment/BKPM. Deputy Minister of Investment Todotua Pasaribu revealed that by 2024, the total value of unrealized investment had reached approximately IDR 2,000 trillion.

To address this, the government is promoting regulatory reforms, including:

  • Strengthening the Online Single Submission (OSS) system
  • Implementing the “fiktif-positif” principle under Government Regulation (PP) No. 29/2025, which grants legal certainty if licensing is not processed within a specified timeframe
  • Adopting a post-audit approach to accelerate permit issuance, especially in industrial estates and special economic zones

– Kontan, July 4, 2025

 

To Achieve 6.3% Growth in 2026, Indonesia Needs IDR 8,297 Trillion in Investment

Minister of National Development Planning (Bappenas) Rachmat Pambudy stated that to reach the 6.3% economic growth target in 2026, Indonesia will require a total investment of IDR 8,297.8 trillion.

Investment needs breakdown:

  • Private sector: IDR 7,467.1 trillion (89.99%)
  • State-owned enterprises (SOEs): IDR 480.8 trillion (5.79%)
  • Government: IDR 349.9 trillion (4.22%)

Given the government’s fiscal limitations, the roles of SOEs and the private sector are critical in driving high value-added projects. Rachmat emphasized the importance of aligning planning with budgeting and prioritizing productive investments in sectors such as agriculture, energy (including renewables), manufacturing, and the digital economy.

– Antara, July 3, 2025

 

Import Deregulation of 10 Commodities: Government’s Strategy to Tackle Global Uncertainty and Strengthen Domestic Economy

The Indonesian government, through Coordinating Minister for Economic Affairs Airlangga Hartarto, has officially deregulated imports of 10 strategic commodities, following the directive of President Prabowo Subianto. This policy aims to address global economic uncertainty, strengthen both the national and ASEAN regional economies, and foster a more competitive and labor-intensive business ecosystem.

The deregulation involves the removal of import approval requirements (PI) and the easing of import bans/restrictions (lartas) on several key commodities, including forestry products, subsidized fertilizers, fuel and plastics, as well as certain chemicals. Additionally, goods that support the Free Nutritious Meals program—such as sports shoes, bicycles, and food trays—are also subject to relaxed import regulations.

– Kontan, July 1, 2025

 

Indonesia’s Coal Exports Weaken in January–May 2025 Period

Indonesia’s coal exports continued to decline through May 2025, according to Statistics Indonesia (BPS). Export value reached US$ 10.26 billion, down 19.1% year-on-year from US$ 12.68 billion in the same period last year. Export volume also dropped 4.65% year-on-year to 156.37 million tons.

The decline was mainly driven by weakening demand from key trading partners such as China, India, and Japan:

  • India: export value down 21.64%, volume down 9.68%
  • China: export value down 37.34%, volume down 19.39%
  • Japan: export value down 36.11%, volume down 22.68%

BPS Deputy Pudji Ismartini noted that changing preferences toward higher-calorie coal may have affected demand. Additionally, China’s domestic strategy played a significant role. The country has ramped up its coal exports due to oversupply, reaching 2.5 million tons in the first five months of 2025—a 13% increase year-on-year.

– Kontan, July 2, 2025

 

President Prabowo Inaugurates Southeast Asia’s Largest Electric Vehicle Battery Industry Ecosystem in Karawang

President Prabowo Subianto officiated the groundbreaking ceremony for the Electric Vehicle Battery Industry Ecosystem project at Artha Industrial Hills (AIH) in Karawang, West Java, on June 29, 2025. This strategic project is a collaboration between Indonesia’s ANTAM, IBC, and the Chinese consortium CATL–Brunp–Lygend (CBL).

Valued at US$ 6 billion, the project is part of Indonesia’s national downstream industrialization agenda and is claimed to be the largest EV battery ecosystem in Southeast Asia. Of the six sub-projects, five are located in East Halmahera (North Maluku), with one integrated manufacturing hub in Karawang.

The project is expected to generate 8,000 direct jobs and 35,000 indirect jobs, forming part of a broader US$ 45 billion downstream investment initiative comprising 18 projects launched in mid-2025.

– Tempo, July 2, 2025

 

Government Prepares Single Price Policy for 3-kg LPG to Reduce Inequality and Subsidy Leakage

The Ministry of Energy and Mineral Resources (ESDM) plans to implement a nationwide single price policy for 3-kg LPG to reduce regional price disparities and ensure equitable access for low-income communities. Currently, prices are set by local governments, resulting in significant variation across regions. Under the new policy, the central government will set the price, with Pertamina Patra Niaga overseeing distribution.

ESDM Minister Bahlil Lahadalia stated that the policy aims to eliminate pricing manipulation and enhance the effectiveness of the 3-kg LPG subsidy, which amounts to IDR 87 trillion annually. The subsidized LPG price is expected to range between IDR 16,000 and IDR 19,000 per canister.

– Bisnis, July 4, 2025

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