QNB affirms Indonesia's economy remains on solid growth foundations
Doha: QNB said that Indonesia’s economy continues to rest on solid growth foundations, despite global challenges and volatility that could lead to a slowdown.
The bank pointed out that resilient domestic consumption, expansionary monetary policies, and ongoing momentum in infrastructure and capital spending projects are the main supportive factors contributing to maintaining stable growth in the face of these headwinds.
The bank’s weekly report noted that Indonesia has delivered exceptional economic growth and stability over recent decades.
From 2000 to 2024, the Indonesian economy recorded an average growth rate of 5%, a strong achievement for the world’s fourth most populous country, especially considering major challenges such as the global financial crisis and the COVID-19 pandemic.
The report also noted that economic activity began to slow down toward the end of last year, affected by uncertainty following the presidential elections, a decline in commodity prices, and monetary tightening.
At the beginning of this year, US President Donald Trump’s announcement of sweeping tariffs on global trading partners fueled concerns over significant disruptions to the global economy, affecting overall growth forecasts.
The report added that the United States imposed 32% tariffs on Indonesian goods, posing a major threat to Indonesia’s export sector. However, these tariffs were later placed under a temporary suspension, while Indonesia tries to reach an agreement that includes preferential tariffs for US goods, improved access to its critical minerals, and increased imports of American fuel.
QNB’s report highlighted that the Indonesia Activity Tracker (IAT), a real-time gauge of economic momentum using high-frequency indicators, showed that Indonesia’s economic growth peaked at 5.3% year-on-year in October, before gradually slowing to settle at a long-term average growth rate of 5%.
The report stressed that despite this apparent stability, a high level of uncertainty persists globally. The bank believes that Indonesia’s macroeconomic outlook remains positive, despite major headwinds, based on three key factors:
First, domestic consumption continues to be a strong growth driver this year, accounting for 55% of GDP, making it a central element in supporting economic momentum. It added that a resilient labor market underpins the strength of the consumption sector, which has seen a remarkable recovery since COVID. Unemployment dropped from a peak of 7.1% in 2020 to 4.8% in 2025, marking its lowest level since 1998.
Second, the report said that inflation control and a stable exchange rate for the Indonesian rupiah have given Bank Indonesia (the central bank) room to implement expansionary monetary policies.
Annual inflation has remained low and within the target range of 1.5%-3.5%. In this regard, the rupiah rebounded by nearly 3.5% after hitting its lowest point on April 9. As a result, with lower inflation and a stable currency, Bank Indonesia cut interest rates by 25 basis points in May to 5.5%, marking the third rate cut since September last year.
The report mentioned that the central bank has also taken several steps to boost credit in the economy, including lowering reserve requirements, raising foreign financing limits for domestic banks, and committing to purchase $9.3 billion in government bonds on the secondary market.
In addition, the bank allocated $7.9 billion to support the government’s affordable housing program, among other initiatives aimed at boosting economic momentum.
Third, QNB noted that Indonesia was moving forward with an integrated set of large-scale infrastructure and capital investment projects to attract more investment and boost the economy’s productive capacity. Infrastructure investment is expected to remain a top priority for the new administration, with major projects underway in transport (roads, railways, airports, and ports) and energy (including renewables and a major refinery), as well as the infrastructure needed for operating new factories.
The bank noted that in this context, the newly launched sovereign wealth fund Danantara has been tasked with focusing on strategic investments, such as natural resource processing and the development of artificial intelligence technologies.
The report concluded by saying that government investment will sustain a healthy level of overall investment, expected to remain above 30% of GDP, and will contribute to a steady pace of economic growth in Indonesia.