Global Economy Improves, Domestic Indicators Stay Resilient: Purbaya
Key Takeaways
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JAKARTA, investortrust.id — Finance Minister Purbaya Yudhi Sadewa says the global economy is showing signs of recovery and is not as bleak as many feared. Speaking at the September 2025 edition of the “APBN KiTa” briefing at the Ministry of Finance in Jakarta on Monday, Sept 22, 2025, he stressed that a stronger international backdrop, combined with solid domestic demand, will support Indonesia’s resilience.
“They are starting to recover. If my calculations are correct, the recovery will take time, but the trajectory looks better,” Purbaya said. He pointed to the global manufacturing Purchasing Managers’ Index reaching 50.9 in August, signaling renewed expansion. Europe, for the first time since 2022, also returned to expansion, while most G20 and ASEAN economies showed solid momentum.
Purbaya explained that the U.S. business cycle could extend to 2030 after its 2023 expansion, giving a stable outlook for the next five years. “This is the global environment ahead. If we were fearful before, now we should be more confident,” he said.
Confidence is also underpinned by U.S. interest rate cuts, which usually stimulate global activity. Purbaya urged the Federal Reserve to be more aggressive in lowering the Fed Funds Rate to create stronger export opportunities for emerging markets, including Indonesia.
He noted that markets expect two more cuts this year, but in his view, one is more likely given still-strong U.S. growth. “If the Fed is more aggressive, we can enjoy faster growth, stronger exports, and a healthier global cycle,” he said.
Domestically, Indonesia’s trade balance remained a bright spot. From January to August 2025, cumulative exports and imports reached US$41.06 billion, a year-on-year increase of 52.35 percent.
“This is fantastic growth. Even with talk about front-loading before tariffs, the fact is our trade kept growing. It shows global demand is not as weak as feared. We only need to focus on maintaining domestic momentum,” Purbaya said.
He highlighted key domestic indicators that supported optimism. Manufacturing PMI stood at 51.5 in August, remaining in expansion. Consumer confidence stayed strong at 117.2. Retail sales rebounded by 2.7 percent year-on-year after the Lebaran holiday.
Industrial electricity consumption rose 4.1 percent annually, while business consumption grew 4.7 percent. Cement sales, a proxy for construction investment, also showed improvements in recent months, though overall building investment still contracted 2.9 percent year-on-year.
On the fiscal side, Purbaya reported that Indonesia’s primary balance remained in surplus at Rp22 trillion as of Aug 31, 2025.
“Ideally, the primary balance should be negative at this point, which means central government spending has been too slow. We need to accelerate disbursements so the fiscal design of 2025 is fully realized,” he said. The state budget recorded a deficit of Rp321.6 trillion, or 1.35 percent of GDP, as of August, with the full-year deficit projected to reach Rp662 trillion, or 2.76 percent of GDP.
Meanwhile, Bank Indonesia had already cut its policy rate six times since September 2024, totaling 150 basis points, bringing the BI rate to 4.75 percent. Governor Perry Warjiyo said the easing aligned with government fiscal measures, including moving state funds to state-owned banks, to stimulate growth while preserving stability.
Despite these positive signals, the rupiah weakened to Rp16,498 per US dollar on Sept 19, down 3 percent year-to-date. Purbaya attributed the decline partly to violent demonstrations in late August that rattled investor sentiment. “The turmoil made investors nervous. But with foreign funds returning to the equity market, prospects are improving,” he said.
Bond market indicators showed resilience. The spread of rupiah government bond yields narrowed from 240 basis points at the start of the year to 216 basis points in September, while the spread between Indonesia’s dollar-denominated bonds and U.S. Treasuries eased from 88 to 79 basis points.
“Our country risk remains contained, and if the economy improves further, spreads should continue to narrow,” Purbaya said.
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