Indonesian Economy Expected To Grow 4.93% In Q2-2025, Here Are The Drivers

Bank Mandiri's Economic Team predicts that the Indonesian economy could grow at 4.93% in the second quarter of 2025, driven by government spending that is starting to increase as budget allocations are disbursed. However, household consumption is predicted to grow moderately due to seasonal factors after Eid. 

"One of the drivers is government spending, because spending has been unlocked. This can support the acceleration of government spending in the future and support overall economic growth," explained Head of Macroeconomic & Financial Market Research Department Bank Mandiri, Dian Ayu Yustina in the Mandiri Economic Outlook agenda for the second quarter of 2025, Monday (19/5). 

In terms of APBN realization, Dian said that Indonesia is still relatively on track along with the fiscal deficit as of March 2025 which tends to be small. So that with the room for policy relaxation from both the fiscal and monetary sides, it will also drive economic growth in the second quarter of 2025. Although there are several risks on the state revenue side from the trade balance which has an impact on falling commodity prices due to the impact of the imposition of US reciprocal tariffs. "We are still watching the progress of the negotiations. Sentiment could change positively if the trade negotiations run smoothly," said Dian. 

From the banking credit side as one of the driving forces of the economy, Dian said that banking is still faced with quite tight liquidity, with the loan to deposit ratio (LDR) recorded at 87.77% as of March 2025. 

Meanwhile, on the credit side, the corporate credit segment is still growing healthily, but there is a slowdown in the growth rate of MSME credit, so the right policy is needed to encourage MSME credit growth. 

From the monetary side, Dian said that Bank Indonesia has the potential to cut its benchmark interest rate by 25 basis points (bps) at the May 2025 Board of Governors Meeting (RDG) along with the potential for a decrease in the Federal Reserve's (The Fed) interest rate. 

"We still see economic growth this year growing to 4.9%. There is a limited impact on the overall economy with various external shocks that occur," said Dian. 

Tag: Bank Mandiri's Indonesian Indonesian Economy