Indonesia’s Economy Grows 4.8% in Q1 2025. What Does it Mean?

Indonesia’s economic growth was 4.8 percent (year-on-year) in the first quarter of 2025 (I/2025). According to the Central Statistics Agency (BPS), this figure is lower than the annual economic growth in the first quarter of 2024, which amounted to 5.11 percent. In a press conference held live in Hybrid on Monday, 5 May, BPS Head Amalia said that Indonesia’s economic growth in the first quarter of 2025 amounted to 4.8% compared to the first quarter of 2024. Economic growth was also recorded lower than in the fourth quarter of 2024, which grew 5.02% (year on year) YoY.

The Indonesian economy’s slowdown occurred due to household consumption growth stagnation. BPS Head Amalia said that economic growth in I/2025 was supported by the growth of household consumption and export components, which grew by 4.89 percent and 6.78 percent, respectively, on an annual basis, with the high growth expenditure component exports driven by an increase in the value of non-oil and gas exports and foreign tourist visits. Then household consumption grew due to the moment of Ramadan and Eid al-Fitr holidays at the end of March 2025.

Josua Pardede, Chief Economist of PT Bank Permata Tbk, also stated that an increase in household consumption will always be related to economic growth. With a slowdown or stagnation in household consumption growth, overall economic growth will experience a slowdown.

The stagnation of public consumption is increasingly casting a shadow over the increasing number of unemployed. BPS noted that Indonesia’s unemployment rate increased by 83,000 people compared to February 2024, to 7.28 million people in February 2025. In 2025, Indonesia’s working-age population reached 216.79 million people, an increase of 2.79 million people compared to the previous year. Of these, there were 153.05 million people in the labor force category, an increase of 3.67 million people from February 2024.

This increase in population is not balanced by the provision to absorb labor, which causes many people to be unemployed due to few jobs and having to compete with others. An economist from the Department of Economics at Andalas University, Syafruddin Karimi, also mentioned that the surge in the labor force was not necessarily matched by the absorption of labor, which caused an increase in the unemployment rate in that period. Also, the number of unemployed people, which continues to increase as a result of the rampant layoffs (PHK), will certainly add pressure to the economy. This has an impact on people’s purchasing power, which is weakening and slowing down domestic consumption, which is the main engine of economic
growth.

The slowing purchasing power will also make it difficult for companies to sell their products and services, leading to a larger wave of layoffs. According to Syafruddin, there needs to be more budget allocation for social assistance from the government, which could widen the state budget deficit and increase the country’s debt burden. As unemployment rises, security stability is also potentially compromised as more people lose their source of income.