A mild slowdown in the first quarter of the year

INDONESIA - Report 06 Jun 2025 by Cyrillus Harinowo

The Indonesian economy posted its Q1 2025 GDP growth result at 4.87%, lower than the 5.03% annual growth in Q4 2024. Compared to the previous quarter, the Indonesian economy contracted by 0.98%, which followed the regular cycle. The fastest sectoral growth in Q1 2025 was in agriculture, forestry and fishing, at 10.52% Y/Y, while "other service activities" grew by 9.84%. On the expenditure side, the largest growth took place in private consumption expenditure, which expanded by 4.89%.

The mild slowdown was accompanied by a small deficit in the current account for that quarter, far smaller than the previous quarter. While in Q4 2024 the current account registered a deficit of $1,127 million or 0.31% of GDP, in Q1 2025 the current account reported a lower deficit of $177 million or 0.05% of GDP. At the same time, the financial and capital account of the balance of payments in Q1 2025 recorded a similarly small deficit of $331 million. The deficit in the current account combined with the deficit in the financial account led the overall balance of payments to a deficit of approximately $787 million, leading foreign exchange reserves to fall to $157,090 million.

The Central Board of Statistics released the balance of trade data for April 2025. This report was unusually late. Exports decreased by 10.77% M/M and reached $20,743.8 million in April, with non-oil exports down by 10.19% to $19,574.5 million. On the other hand, imports increased by 8.8% to reach $20,585 million, resulting in a trade surplus of $158.8 million, another surplus, but much smaller than in March.

The Central Board of Statistics also released the inflation report for the month of May, which showed deflation of 0.37% M/M. As a result, Y/Y inflation stood at 1.60%, below that of April. Given the sanguine inflation statistics, and in an effort to revive the economy, Bank Indonesia decided to cut the benchmark rate by 25 basis points to 5.5% at its meeting of May 20-21, 2025.

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