IMF Cuts Indonesia’s 2025–26 Growth Forecast to 4.7 Percent as Trade Tensions Rise

JAKARTA, investortrust.id – The International Monetary Fund says Indonesia’s economy will expand just 4.7 percent in both 2025 and 2026, trimming its outlook as a widening trade rift chills global demand and threatens to derail Jakarta’s ambition of 5.2 percent growth next year.

In its April 2025 World Economic Outlook, the IMF lowered the country’s January projection of 5.1 percent for each year, underscoring how a new wave of U.S. reciprocal tariffs is reshaping an economic order that has stood for eight decades. The downgrade placed Indonesia below the 5 percent threshold widely viewed by policymakers as the minimum pace needed to absorb new workers and lift incomes.

IMF Chief Economist Pierre-Olivier Gourinchas told reporters the cut was driven by “a sudden rise in tariffs and a sharp jump in policy uncertainty” that had already dampened investment plans and trade flows. On 2 April 2025, U.S. President Donald Trump announced sweeping reciprocal duties on major trading partners—including Southeast Asia—sending shockwaves through global supply chains.

The Fund also predicted disinflation next year, with consumer-price gains easing to 1.7 percent in 2025 before rebounding to 2.5 percent in 2026. Indonesia’s current-account deficit was forecast to widen to 1.5 percent of GDP in 2025 and 1.6 percent in 2026, from an estimated 0.6 percent in 2024, suggesting the country will rely more heavily on external financing at a time when global borrowing costs remain high.

Globally, the IMF expected growth to slow to 2.8 percent in 2025 and edge up to 3 percent in 2026, with Asia expanding 3.9 percent and 4 percent respectively. The outlook for emerging markets as a group was marked down by half a percentage point to 3.7 percent, reflecting exposure to tariff hikes and capital-flow volatility.

Gourinchas warned that the tariff dispute could produce “significant slowdowns” across developing economies depending on where duties ultimately land. “The risk is not only the direct impact on trade volumes but the broader uncertainty that discourages firms from committing capital,” he said.

The IMF’s forecasts stand in contrast to the Indonesian government’s own assumptions, which underpin next year’s draft budget. Parliament and the administration have agreed on a 5.2 percent target for 2025, banking on continued infrastructure spending, household consumption and a rebound in commodity exports. Should the IMF’s gloomier scenario play out, officials may be forced to revise fiscal plans or accelerate structural reforms aimed at boosting productivity.

Indonesia’s export prospects had already been clouded by softer demand from key partners. Statistics Indonesia data show that in March 2025 China, the United States and Japan remained the top three non-oil-and-gas destinations, but shipments to the latter slipped from a year earlier.

Even so, some analysts see room for optimism. A weaker rupiah could cushion exporters, while an expected drop in global energy prices might keep a lid on inflation and support real household incomes. Bank Indonesia, which has held its policy rate at 5.75 percent since late 2024, has signaled room to ease should external pressures intensify.

For now, the IMF urged Jakarta to press ahead with efforts to broaden its tax base and deepen domestic capital markets, measures it said would help insulate Southeast Asia’s largest economy from external shocks.