Indonesia’s economic growth in the second quarter of 2025 has significantly exceeded expectations, largely driven by accelerated infrastructure projects and state-sponsored incentives that boosted consumer spending. Statistics Indonesia (BPS) official Edy Mahmud announced on Tuesday that gross domestic product (GDP) expanded by 5.12 percent year-on-year (YoY), well above the market consensus of 4.8 percent. This marks a notable acceleration compared with 4.87 percent in the previous quarter and 5.02 percent in the same period last year. On a quarter-to-quarter basis, GDP grew 4.04 percent, signaling a strong rebound in domestic economic activity. Coordinating Economic Affairs Minister Airlangga Hartarto welcomed the development in a separate press conference, saying, “Thank God, GDP growth has bounced back to 5 percent,” while reiterating the government’s full-year target of 5.2 percent. A major driver of this expansion was gross fixed capital formation (GFCF), which reflects investment in fixed assets such as buildings, machinery, and equipment. GFCF rose 6.99 percent YoY, with machinery purchases showing the most significant growth. This represents a sharp recovery from just 2.12 percent growth in the previous quarter. Edy emphasized that government projects such as toll roads in Sumatra and Java, the next stage of the Jakarta MRT, the Bali MRT, the three million houses program, and the Jakarta sea wall were key contributors to investment growth. Spending on capital goods, a major component of GFCF, surged by 30 percent YoY, despite the fact that overall government expenditure contracted by 0.33 percent.
Supporting this trend, BPS revealed that imports of capital goods in June jumped 38 percent YoY, which Investment Minister Rosan Roeslani described as an “all-time high.” These imports are typically viewed as an indicator of business expansion, as capital goods are used to produce other goods and services. However, Economist Intelligence Unit researcher Wen Chong Cheah cautioned that the trend should not be overinterpreted, noting that imports may reflect delayed investment decisions or government-driven infrastructure procurement rather than private sector confidence.
On the consumption side, household spending, which represents the largest portion of GDP, rose 4.97 percent YoY, slightly higher than the 4.93 and 4.95 percent recorded in the two previous quarters. Consumer stimulus measures introduced during the summer holiday period, such as transportation discounts, also played a role in boosting demand. These programs helped lift the transportation and warehousing sector, which grew 8.52 percent, while the “other services” category expanded by 11.31 percent, both benefiting from a surge in tourism during school holidays and collective leave days. At the same time, manufacturing grew 5.69 percent, trade 5.37 percent, and construction 4.98 percent YoY, with these three sectors together contributing more than 40 percent of national output.
The financial markets reacted positively to the upbeat data. The IDX Composite Index rose 1 percent in morning trading to 7,536.61 points before easing slightly to close at 7,515.18, up 0.68 percent overall. Even so, analysts urged caution about the outlook. Permata Bank chief economist Josua Pardede warned that global uncertainties could weigh on growth in the second half of the year, citing trade tensions and China’s export pivot toward Southeast Asia, which may increase imports into Indonesia and dampen GDP momentum. He argued that Indonesia will need to rely on accommodative fiscal and monetary policy alongside continued stimulus to maintain momentum, projecting full-year growth between 4.7 and 5.1 percent. Similarly, Bank of America economists Kai Wei Ang and Rahul Bajoria called the second quarter figures a “surprise,” noting their forecast had been 4.8 percent, based on expectations that domestic policy reforms would temporarily slow growth in the near term.
August 5, 2025, The Jakarta Post(https://www.thejakartapost.com/business/2025/08/05/gdp-growth-surprises-to-upside-thanks-to-construction-projects.html)