Indonesia eyes stimulus package, rate cuts to ensure 5% growth
The country faces weakening consumption and manufacturing at home, as well as the threat of higher tariffs and slowing trade abroad
INDONESIA pledged to use its fiscal and monetary firepower to ensure economic growth maintains its 5 per cent pace this year.
Growth was the focal point of a quarterly meeting of top economic policymakers on Monday (Jul 28), as Indonesia faces weakening consumption and manufacturing at home, as well as the threat of higher tariffs and slowing trade abroad.
“The message this time is clear: we at the KSSK are working together to maintain economic growth amid a financial system that remains stable,” Finance Minister Sri Mulyani Indrawati said at a briefing in Jakarta.
The KSSK is Indonesia’s Financial System Stability Committee, comprising the finance ministry, the central bank, the banking regulator and deposit insurance agency.
The government is preparing a third stimulus package aimed at boosting domestic transportation, tourism and economic activity in the regions during the year-end holidays, according to Indrawati. The stimulus aims to maintain Indonesia’s gross domestic product growth at around 5 per cent this year, she said.
A US$1.5 billion package of measures rolled out in June – which included salary and social aid top-ups as well as toll discounts – likely supported GDP growth in the second quarter, she added. Electricity discounts and food assistance were also given out at the start of the year.
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Meanwhile, Bank Indonesia (BI) governor Perry Warjiyo reiterated that he continues to look for room to cut interest rates and support economic growth.
“The magnitude and timing of rate cuts will be in accordance with global and domestic dynamics,” he said, adding that core inflation will likely be around 2.4 per cent this year, below the midpoint of the 1.5-3.5 per cent target.
BI eased monetary policy anew at its July meeting, for a total of 75 basis points in rate cuts so far in 2025. It also plans to continue reducing the issuance and yields for its rupiah securities, Warjiyo said.
“We will use fiscal, monetary, and regulatory instruments to maintain the economic growth momentum. We will also collaborate to anticipate risks arising from global dynamics,” Indrawati said.
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