Last month, after analyzing the latest available macroeconomic data, we concluded that the Indonesian economy is slowing at a faster rate that we had initially expected, hence we changed our projection for Indonesia’s economic growth in 2025 from 5.0 percent year-on-year (y/y) to 4.9 percent (y/y). And this might perhaps not even be the last downward revision this year as there remain reasons to be pessimistic.

What is an interesting and positive change compared to last month is that the central bank of Indonesia (Bank Indonesia) decided to cut its key rate from 5.50 percent to 5.25 percent in July 2025, thereby (in theory) allowing more room for credit growth, hence more room for economic growth.



In fact, it was the fourth step in a monetary easing cycle in Indonesia that started in September 2024 (when Bank Indonesia cut its benchmark rate from 6.25 percent to 6.00 percent). Typically, it takes at least six months before an interest rate cut is felt in the real economy. And so, ideally, we will soon see an improvement in demand for credit across Indonesia.

Indonesia’s Statistical Office (Badan Pusat Statistik, BPS) is set to release Indonesia’s Q2-2025 gross domestic product (GDP) data on Tuesday 5 August 2025.

So, now let’s zoom in on the latest available macroeconomic data that were released by BPS, Bank Indonesia, and other institutions. It is particularly interesting to take a careful look at data that reflect the state of domestic demand in Indonesia. After all, household consumption accounts for around 55 percent of Indonesian GDP.

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