The International Monetary Fund (IMF) has praised Indonesia for maintaining solid economic growth and keeping inflation within target despite mounting global headwinds, while warning that major domestic policy shifts could pose risks if not carefully managed.
In a statement following its 2025 Article IV consultations, the IMF said on Saturday that “Indonesia remains a global bright spot, with strong economic growth amid a challenging external environment, and inflation expected to remain comfortably in the target range.”
IMF mission chief for Indonesia Maria Gonzalez said the economy has shown resilience to external shocks, with gross domestic product (GDP) projected to grow by 5 percent in 2025 and 5.1 percent in 2026.
However, she pointed to lingering external risks, including trade tensions, prolonged global uncertainty, and volatility in financial markets. On the domestic front, Gonzalez cautioned that large policy changes, if not backed by strong safeguards, could build vulnerabilities.
“Upside risks include bolder structural reforms, including a faster-than-anticipated push on the trade front, and positive spillovers from stronger growth among trading partners,” she said.
The IMF projects Indonesia’s fiscal deficit to reach 2.8 percent of GDP this year, broadly in line with the government’s latest estimate of 2.78 percent and still below the legally mandated cap of 3 percent. The deficit stood at 1.56 percent of GDP at the end of the third quarter. Finance Minister Purbaya Yudhi Sadewa said on Friday that several state institutions had opted to return unspent funds rather than fully absorb their budget allocations. For 2026, the IMF expects the deficit to widen slightly to 2.9 percent of GDP, based on more conservative assumptions for growth and revenue compared with those in the state budget plan, which targets a lower deficit of 2.68 percent.
“Carefully managing budget execution to secure the authorities’ budget target would provide needed fiscal support to the economy while preserving fiscal space should downside risks materialize,” Gonzalez said, adding that fiscal risks must be contained through prudence, strong safeguards, and rigorous oversight of quasi-fiscal operations.
The IMF also called for stronger revenue mobilization, better-quality spending, and improved efficiency to strengthen the role of fiscal policy in supporting growth. Gonzalez noted the government’s ambition to turn Indonesia into a high-income economy by 2045, but stressed that this would require ambitious structural reforms, including improvements in infrastructure, deregulation, reduced trade barriers, and deeper global integration. She added that Indonesia needs to strengthen its supply side, promote micro, small, and medium enterprises, attract higher foreign direct investment, and foster a more dynamic private sector. The IMF’s assessment was based on discussions with government officials, Bank Indonesia, the Financial Services Authority (OJK), public institutions, as well as private sector and civil society representatives held between Nov. 3 and 12.
November 18, 2025, The Jakarta Post
(https://www.thejakartapost.com/business/2025/11/18/indonesia-still-bright-spot-in-troubled-world-economy-imf.html)