Jakarta. Indonesia’s economy is expected to expand by just 4.91 percent in the first quarter of 2025, marking a slowdown from both the previous quarter (5.02 percent in Q4 2024) and the same period last year (5.11 percent in Q1 2024).

The projection reflects a mix of persistent domestic and external pressures, as captured by macroeconomic indicators, business and consumer surveys, and real-sector data.

“Overall, the Q1 2025 growth estimate of 4.91 percent reflects a combination of still-solid but weakening consumption, restrained government spending, and a sluggish recovery in investment and exports due to ongoing global headwinds,” said Permata Bank Chief Economist Josua Pardede on Sunday.

According to Josua, household consumption -- the backbone of Indonesia’s economy -- is expected to grow by just 4.5 percent year-on-year in Q1, down from 4.91 percent in the same quarter of 2024. Government spending is projected to contract by 2.88 percent year-on-year, a sharp reversal from the 20.44 percent growth seen in Q1 2024.

“This is in line with the realization of the state budget, which reached just 17.1 percent of the annual spending target as of March 2025,” he noted.

Investment, meanwhile, is expected to grow by 3.11 percent year-on-year -- a relatively stable figure supported by a 15.9 percent rise in real investment, reaching Rp 465.2 trillion in Q1 2025. Exports of goods and services rose 9.52 percent year-on-year, continuing their positive momentum thanks to downstream mineral processing and higher-value manufacturing exports.

However, imports also rose by 5.07 percent year-on-year, signaling that domestic demand has not yet fully recovered. Uncertainty from abroad -- particularly the impact of US trade tariffs and fears of a global slowdown -- poses further risks to Indonesia’s short-term outlook.

“In this context, policy coordination between fiscal and monetary authorities will be critical to maintaining stability and supporting domestic demand in the quarters ahead,” Josua added.

In a separate statement, Reyhan Noor, lead researcher at Laboratorium Indonesia 45, said domestic growth remains hampered by budget efficiency measures and delays in executing priority government programs.

He cited the Free Nutritious Meals initiative as an example. Though expected to have a multiplier effect, its implementation has yet to meaningfully boost consumption. Meanwhile, government spending composition has declined due to fiscal efficiency efforts.

Reyhan also warned that while Indonesia’s economy is not heavily dependent on global trade, US tariff policies could still weigh on investment and consumption by driving up prices and reducing job opportunities.

“To mitigate these uncertainties, the government must adopt clear and well-coordinated policies,” he said. “This includes trade negotiations with the United States -- Indonesia must avoid fallout that could hurt trade ties with other countries or diminish the competitiveness of domestic industries.”