Entrepreneurs Reveal Reasons For Sluggish Economy: Purchasing Power, State Budget To Rupiah

Business people in Indonesia have revealed a number of problems that have caused the Indonesian economy to continue to decline in growth. Until the first quarter of 2025, it was only able to grow by 4.87%. 

"We can see that the economy in the first quarter of 2025 is increasingly challenging," said the Chairperson of the Indonesian Employers Association (Apindo) Shinta Kamdani, during the Apindo Media Briefing in Jakarta, Wednesday (14/5/2025). 

Shinta said that the first cause that made the Indonesian economy no longer able to grow at the 5% level was the people's purchasing power which was collapsing. Reflected in the growth rate of household consumption, even though there were seasonal factors of Ramadan and Eid 2025, it was unable to grow above 5%. 

Household consumption, which has been the main driver of national economic growth, only grew by 4.89% in the first quarter of 2025, the lowest in the last five quarters. In fact, this quarter includes the Ramadan period, a momentum that usually drives people's spending. 

"So it is very clear that this year's Ramadan is different from previous years," said Shinta. 

The second problem is the government's fiscal inability to expand, amidst the slowing domestic economy. Shinta said that the government's fiscal policy at the beginning of this year showed a more cautious tendency, government spending contracted by 1.38%. 

Meanwhile, investment also showed a weakening trend. The Gross Fixed Capital Formation (PMTB) indicator only grew 2.12% in the first quarter of 2025. According to Shinta, this is the lowest investment growth in the last two years. 

This weakening was triggered by two main factors, the wait-and-see attitude of investors, amidst the government transition and global uncertainty, and unresolved structural problems, such as an investment climate that is not yet friendly enough, regulations that are considered still complicated, and delays in implementing deeper structural reforms. 

In the field, business actors also face operational challenges such as high logistics costs, to disruptions to business security. 

This is exacerbated by export performance which also does not provide significant support, with a cumulative decline of 7.53% compared to the same quarter last year. The causal factors include falling commodity prices and weakening demand from major trading partners such as China and the European Union. 

Tag: Gross Fixed Capital Formation PMTB Ramadan