The latest Asian Development Bank (ADB) research released in September 2025 on economic outlook states that economic growth in the Asia Pacific region in 2025 will slow down to 4.8% from the previous prediction in April of 4.9%. Indonesia's economic growth in 2025 is also predicted to slow down to 4.9% after being predicted at 5.0% in April.

However, the implementation of adaptive, appropriate, and harmonized fiscal and monetary policies will ensure that economic performance continues to run, even beyond the projected estimates.

From Manila, Philippines, ADB issued the statement in a written statement on Tuesday (30/9/2025). Speaking on behalf of the institution, ADB Chief Economist Albert Park cited a number of reasons for the revision.

"US tariffs are at historically high levels and global trade uncertainty remains very high. Growth in emerging Asia and the Pacific remains resilient thanks to strong exports and domestic demand, but the deteriorating external environment has impacted the outlook going forward," Park explained.

Specifically, ADB expects the Southeast Asian economy to experience the largest decline of 0.4 percentage points to 4.3% for this year and 2026. US trade policy uncertainty related to sectoral tariffs on semiconductors and pharmaceutical products and financial market volatility are the two main reasons for the decline in growth.

Slightly different from the ADB projections, the OECD projections published a week earlier projected that the economic performance of the Asia Pacific region will be better this year and next year. In particular, according to the OECD, Indonesia will experience growth of 4.9% in 2025 and 4.9% in 2026.

"Economic growth in G-20 emerging markets will be milder in the coming year. In Indonesia, looser monetary policy and stronger public sector investment will be the main underpinnings for annual growth to reach 4.9% in 2025 and 2026," the report notes.

Although below 5%, ADB considers Indonesia's economic growth projection to be moderate for the Southeast Asian region, ranking third after Vietnam with a projection of 6.7% for this year and 6.0% in 2026; and the Philippines with a projection of 5.6% for this year and 5.7% in 2026.

According to ADB, the reason for Vietnam's first-place growth has three causes. First, strong trade performance following the revival of the export-oriented manufacturing sector. Second, sustained fiscal stimulus as a key driver of growth. Third, accelerated investment followed by accommodative fiscal and monetary policies to stimulate domestic demand and support future economic prospects.

Maintain domestic consumption

The projected slowdown that ADB expects as a knock-on effect of the US reciprocal tariff policy has a number of impacts on economic performance in Indonesia. However, growth should not be a concern if Indonesia can take additional policies in addition to the bank liquidity stimulus and benchmark interest rate cuts that have been taken previously.

Bank Permata Chief Economist Josua Pardede explained that although growth is projected to be relatively stable at around 5.0% in 2025-2026, the impact of a regional slowdown could suppress exports and capital flows. The response to the BI rate cut, liquidity easing, and the placement of Rp200 trillion of state cash in commercial banks to boost credit was appropriate.

However, in order for growth in the fourth quarter of 2025 and the first quarter of 2026 to be less affected, there are additional policies that need to be considered, especially given the opportunity for further stimulus at a time when the provisional realization of the 2025 State Budget recorded a low deficit of 1.35% of GDP.

"Going forward, it is necessary to strengthen programs with high multipliers, such as accelerating spending on connectivity, water and energy infrastructure which are still below the ceiling target. The acceleration of MBG, which has only absorbed 18.3% of the Rp71 trillion ceiling, public transportation subsidies, and the expansion of the social safety net will maintain purchasing power and cushion the impact of the slowdown on domestic consumption," said Josua when contacted by SUAR, Thursday (2/10/2025).

Furthermore, according to Josua, with inflation at 2.65% YoY and stable below the target, room for further BI Rate cuts is still open, especially if the Fed cuts interest rates again towards the end of 2025. Monetary incentives can then be directed more segmented, such as easing the capital buffer ratio for UMKM loans, green financing, and labor-intensive sectors.

"Strengthening domestic financial markets is also important, including deepening interbank money market (PUAB) deepening instruments, increasing the attractiveness of retail SBN so that liquidity is not too dependent on foreign flows, and targeting investment growth of up to 7%-8% with the support of Danantara and private synergies," he explained.

The acceleration of structural reforms is another aspect that should not be forgotten. Deregulation of licensing through Government Regulation No. 28 of 2025 on the Implementation of Risk-Based Business Licensing effective on October 5, 2025 and the acceleration of digital-based Spatial Detail Plans need to be prioritized to attract investors in the downstream, renewable energy, and digital economy sectors, which are more resilient to external shocks.

Josua recommends three policies that need to be pursued to deal with the slowdown. First, accelerate the realization of consumption- and infrastructure-oriented fiscal spending. Second, continue monetary easing with sectoral incentives. Third, accelerate structural reforms to maintain investment flows.

"With this combination, household consumption and domestic investment can still support growth amid global uncertainty," he concluded.

Government measures

Contacted earlier to respond to a similar slowdown projection also reported by the World Economic Forum, Spokesperson for the Coordinating Ministry for the Economy Haryo Limanseto stated that the government has prepared a number of preventive measures against a possible economic slowdown, one of which is by making the state budget a shock absorber.

"Through accelerating the realization of spending and channeling social protection programs for vulnerable groups, the government launched the "8+4+5" economic policy package and semester 2 economic stimulus to increase competitiveness and encourage economic growth and new job creation," Haryo wrote in a written statement received by SUAR, Tuesday (30/9/2025).

In response to the acceleration of deregulation, especially for the ease of doing business that Josua has explained, the mandate of PP 28 of 2025 will accelerate the integration of the entire company administrative system into the online single submission which will speed up the previously very bureaucratic process. Not to forget, downstream strategies for the creation of higher value-added products are encouraged through close cooperation with the business world.

"The government encourages diversification of export markets and utilization of FTAs through the implementation of various cooperation that has been agreed by Indonesia in bilateral, regional and multilateral contexts such as RCEP, ICA-CEPA, and IEU CEPA. Business players are expected to immediately prepare steps to take advantage of the scheme," Haryo concluded.