Economic Update: Indonesian Economy Grew by 5.04% in Q3-2025, in Line with Expectations
In line with expectations, the economic growth rate of Indonesia was recorded at the level of 5.04 percent year-on-year (y/y) in the third quarter of 2025. This is a good result as it slightly exceeded analyst expectations (in our case, we had projected a 5 percent y/y growth rate), and was also a faster growth pace than the one recorded by Indonesia in the same quarter one year earlier (4.95 percent y/y).
However, the Q3-2025 data did show a slowing growth rate than the one Indonesia had enjoyed in Q2-2025, when the pace reached 5.12 percent (y/y), exceeding the expectations of essentially all analysts; and even making many suspicious whether the data released by Indonesia’s Statistical Office (Badan Pusat Statistik, or BPS) are reliable.
Cumulatively, the first three quarters combined, Indonesia’s economic growth was recorded at 5.01 percent (y/y), which means that the Indonesian economy remains expanding at a stable rate (although some might argue that this emerging giant can – or should – grow at a significantly higher level, structurally). It is interesting to add that China’s economy only expanded at a rate of 4.8 percent (y/y) in Q3-2025. So, it is interesting that China’s economic growth has been much more volatile compared to that of Indonesia.
The ‘secret’ here is of course that Indonesia is particularly dependent on its domestic market (this means that whatever the global conditions are, Indonesia will fare well) while China is particularly dependent on exports and investment. Meanwhile, China is much better integrated into the global economy, which is great at times of rising global economic growth (allowing steep growth rates for China’s economy), but is a burden when there is global economic turmoil (pushing down China’s growth rates). Moreover, China has been moving away from its traditional, highly-leveraged, and environmentally costly growth drivers (such as infrastructure and exports) toward new, high-tech, domestic-demand-driven growth. This is a transition that is complex and generates short-term instability.
However, while Indonesia currently ‘benefits’ from weak integration into the global economy (as global economic growth is currently subdued, compared to historical averages), it also means that Indonesia is structurally stuck at a lower growth pace.
Still, growth above the 5 percent (y/y) mark is widely regarded a positive matter for Indonesia, as this mark is typically regarded the minimum pace required to generate enough jobs for the country’s expanding workforce, which, in turn, boosts household wages, increases consumer spending, and attracts direct investment.
But it does mean, though, that the Indonesian government's full-year 2025 economic growth target of 5.2 percent (y/y) is unlikely to be achieved. This automatically also tempers hopes for significantly accelerating economic growth in 2026.
Before we zoom in on Indonesia, let’s first take a closer look at the global economic environment.
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