Indonesia Q2 GDP grows 5.12% year on year, beating expectations
But economists say this strength is unlikely to continue in the second half of 2025
[JAKARTA] Indonesia’s economy surprisingly beat expectations in the second quarter, but analysts remain cautious, warning that the momentum may not last as external pressures mount and the impact of new US tariffs begins to set in.
Data released by Statistics Indonesia on Tuesday (Aug 5) showed that the country’s economy grew 5.12 per cent year on year in Q2, its fastest pace since Q2 2023, and well above a consensus forecast of 4.8 per cent by Bloomberg.
On a non-seasonally adjusted, quarter-on-quarter basis, the gross domestic product expanded by 4.04 per cent in the April-to-June period.
Manufacturing was a key driver of the stronger-than-expected growth, supported by rising demand for export products such as palm oil and base metals.
The value of exports climbed in the first half of the year, boosted by the front-loading of orders as buyers rushed to secure shipments ahead of the implementation of the new 19 per cent US tariffs in August.
“Indonesia’s GDP growth surprised on the upside in Q2, likely helped by a supportive net export balance and stepped-up public spending,” said Radhika Rao, senior economist at DBS.
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Economists say the strong Q2 figures are unlikely to be sustained in the second half of the year. Weaker global demand, slowing trade, and post-tariff adjustments are expected to drag on growth in the coming months.
In a note on Tuesday, a research team from Samuel Sekuritas said third-quarter growth may moderate due to the immediate effects of the US tariff implementation in August and a potential slowdown in export shipments following the pre-tariff rush.
DBS’ Rao also expects growth to moderate in H2, partly due to a trade payback, which is likely to keep Bank Indonesia on a dovish policy path.
Front-loading rush
Indonesia’s export growth surged 10.67 per cent year on year amid the front-loading rush. Imports rose 11.65 per cent.
The upside surprise was also powered by a surge in gross fixed capital formation, which jumped 6.99 per cent year on year, a significant acceleration from 2.12 per cent in the first quarter. This reflects a pickup in infrastructure and machinery investment.
Government spending, meanwhile, fell 0.33 per cent on the year as President Prabowo Subianto shifted budget priorities towards populist programmes, including free meals for children and building schools for low-income families.
Household consumption, the backbone of the economy, accounting for more than half of the GDP, remained steady at 4.97 per cent in Q2. Analysts believe the government’s US$1.5 billion stimulus package disbursed in June helped keep spending stable.
Maybank economist Brian Lee said that while monetary and fiscal stimulus may help cushion the slowdown, structural issues such as weak consumer sentiment and job market concerns may limit a stronger rebound.
“We expect another 50 basis points of rate cuts by Bank Indonesia before year-end, while the government has indicated plans for a third, scaled-down stimulus package.”
Bank Indonesia cut its benchmark interest rate by 25 basis points to 5.25 percent in July, citing its focus on supporting economic growth.
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