Jakarta (VNA) – Indonesia’s economy will expand by 5% this year and 5.1% in 2025 and 2026, according to the World Bank’s latest report.
The latest projection was an increase from the bank's previous estimates of 4.9% this year and next, followed by 5% in 2026.
Indonesia’s economy is expected to steadily grow over the next two years on the back of domestic consumption and investment despite weak exports, the report said.
Household spending, a big contributor to Indonesia's GDP, and election-related spending helped Southeast Asia's largest economy grow 5.11% in the first quarter of 2024.
Indonesia's gross domestic product (GDP) growth is projected to reach an average of 5.1% per year from 2024 to 2026. However, the country will face many obstacles, notably from worsening terms of trade. It noted several risks to the economy, including high interest rates and geopolitical shocks, which could further weigh on exports already impacted by lower prices.
The latest projection assumes a large contribution from public consumption -- with government spending expected to increase -- while foreign direct investment as a share of GDP is projected to return to pre-pandemic levels, World Bank senior economist Wael Mansour said.
He went on to say that Indonesia's "credible" fiscal rule had helped attract investments and lower risk premiums. But president-elect Prabowo Subianto, who will take office in October, is reportedly looking to increase the country's debt-to-GDP ratio to 50% - from less than 40% - to fund his campaign promises including free school meals.
The government's 2025 budget is expected to outline an implementation plan for the new administration's economic goals, and signal its fiscal policy stance./.
Indonesia looks to attract Japanese investors to new capital
A memorandum of understanding (MoU) on cooperation has been signed between the Land Bank Authority of Indonesia and J Trust Group of Japan to develop Penajam Eco City, designed as a commercial hub to serve as the economic engine of Indonesia's new capital.
