Bank Indonesia Has Lowered Its Economic Growth Forecast For Indonesia In 2025 From A Midpoint Of 5.2 Percent To 5.1 Percent. What Is The Reason For This Change?

Bank Indonesia (BI) has revised its economic growth forecast for Indonesia in 2025 to a range of 4.7 percent to 5.5 percent, with a midpoint of 5.1 percent, as of January 15, 2025. Previously, the forecast was between 4.8 percent and 5.6 percent, with a midpoint of 5.2 percent. BI Governor Perry Warjiyo explained that this adjustment followed the January 2025 Board of Governors Meeting and is lower than the December 2024 forecast. "The 2025 range was initially 4.8-5.6 percent with a midpoint of 5.2 percent, but it has now changed to 4.7-5.5 percent, making the midpoint 5.1 percent," he stated during a press conference in Jakarta on January 15, 2025.

Perry noted that the decrease in the growth forecast is due to several factors. First, the economic growth in the fourth quarter of 2024 is expected to be lower than BI's previous estimates. Consequently, BI has also lowered its 2024 growth forecast from a potential 5.1 percent to a range of 5.0 percent to 5.1 percent. "Data from the fourth quarter of 2024 and various surveys indicate a trend of lower economic growth, especially in 2025, starting to show in the fourth quarter," Perry explained.

Another factor is the risk of declining exports for Indonesia this year due to a slowdown in global economic growth. BI predicts that the global economy will grow by 3.2 percent. Additionally, BI observes that household consumption, particularly among the lower middle class, remains weak this year. This decline in consumption has led to insufficient private investment needs.

"Consumer expectation surveys show that expectations regarding income, consumption, and job opportunities are not strong," Perry added. Considering these factors, BI decided to lower its benchmark interest rate to 5.75 percent during the January 2025 meeting to encourage growth.

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