Indonesia may struggle to hit its 5% economic growth target for 2025 amid escalating global trade tensions and sluggish domestic consumption, according to Fitch Ratings’ head of Asia-Pacific Sovereigns.
Thomas Rookmaaker, speaking to Reuters on Wednesday, said that “meeting 5% growth this year will be challenging” due to external economic uncertainty and weakening household demand. In response to these headwinds, Fitch has revised Indonesia’s 2025 GDP growth projection downward by 0.1 percentage point to 4.9%, and forecasts a further dip to 4.7% in 2026.
“External headwinds are a major concern, especially with uncertainty over tariffs, while private consumption is also softening,” Rookmaaker noted.
Indonesia’s government, however, remains more optimistic, maintaining a 5.2% growth target for the year, following 5.03% growth in 2024. But pressure is mounting, with the country facing a 32% tariff on exports to the United States unless a lower rate is agreed upon before a key moratorium expires in July.
Domestic revenue generation has also faced challenges. A tax system upgrade earlier this year caused delays in collections, though the Finance Ministry reported that revenue performance improved by March, achieving 15% of its annual target.
Despite these concerns, Fitch affirmed Indonesia’s sovereign rating at ‘BBB’ with a stable outlook. “Growth is coming down a bit,” Rookmaaker said, “but if it comes down not too drastically or for one year, it doesn’t really move the needle from our perspective. It would move the needle if you have significantly lower growth.”
