Although there are still many challenges, the business world expects the economy to improve in the third quarter. Supporting factors include increased spending on construction projects, a revitalized wholesale trade & automotive sector, and an improved agricultural sector.

Executive Director of the Communication Department of Bank Indonesia (BI) Ramdan Denny Prakoso said that his party expects the business world to stretch in the third quarter.

This is reflected in the Business Activity Survey (SKDU), which was released on Friday (18/7/2025), stating that business activities in the third quarter of 2025 continued to increase as reflected in the results of the Weighted Net Balance (WNB) of respondents at 11.98 percent. This figure increased compared to the second quarter of 2025 which was at 11.70 percent.

Business activities that increased in the third quarter were construction in line with the start of both government and private projects.

In addition, also from the wholesale and retail trade sector along with car and motorcycle repairs. "This is in line with the largest annual automotive exhibition event that can drive vehicle sales," said Ramdan, Friday (07/18/2025).

Not only that, other sectors that are expected to increase are agriculture, forestry, and fisheries. This is supported by a long rainy season that supports the harvest season.

The confidence of the business world is also tried to be captured by the Ministry of Industry through the Industrial Confidence Index (IKI). In the IKI research as of June 2025, it is stated that the confidence of industry players in business prospects in the next six months is still quite maintained.

Business actors are still optimistic about business conditions in the next six months, as indicated by the level of optimism reaching 65.8 percent, while only 9.0 percent answered pessimistically. The rest said that conditions would be relatively the same or stable.

"However, the optimism of these business actors has continued to decline since November 2024, from 73.4 percent to 65.8 percent in June 2025," said Ministry of Industry Spokesperson Febri Hendri, in early July.

Desire to end lethargy

The domestic business world does need an injection of confidence in revival. This is because, in the last six months, the economy has been sluggish.

This is reflected in the Purchasing Managers Index (PMI). Quoting the S&P research institute, Indonesia's PMI position in June at the level of 46.9 decreased compared to May which was at the level of 47.4. An index position below 50 indicates contraction, while above 50 indicates expansion.

The PMI released by S&P is used to show how much factory managers are spending on production materials. When raw material spending is high, it indicates activities to meet market demand are also large. Conversely, when there is not much spending on raw materials, it shows that market demand is also sluggish.

"Looking ahead, firms are less optimistic about output forecasts, with confidence falling to an eight-month low. Confidence fell slightly amid concerns about global economic conditions and their potential impact on Indonesia's manufacturing sector," Usamah Bhatti, Economist at S&P Global Market Intelligence, said in a press statement in early July.

Indonesian Employers Association (Apindo) Economic Policy Analyst Ajib Hamdani said, during the first semester Indonesia faced many challenges both from within and outside the country. Domestic challenges included an economic slowdown that triggered a series of layoffs. At the same time, global conditions also faced equally severe challenges, namely the trade war triggered by trade tariffs initiated by US President Donald Trump.

Ajib said, every new period must be addressed with optimism. In this third quarter, a number of sectors can rise, such as automotive and agriculture. The Gaikindo Indonesia International Auto Show (GIIAS) 2025 exhibition is expected to stimulate automotive sales. The long rainy season also encourages the harvest of agricultural products to be more sustainable.

In addition, in the second semester, government spending can usually be disbursed. This could trigger construction projects.

"To maintain economic growth in the second semester, it is hoped that the government can make government spending the main stimulus," Ajib said.

The principle of government spending must prioritize spending better, which is prudent in carrying out government spending patterns that encourage maximum economic growth. The government must focus on pro job creation, food security and energy. This is in line with President Parbowo Subianto's Asta Cita program, which is to increase quality employment.

According to Bank Permata Chief Economist Josua Pardede, business optimism was strengthened by the June 2025 Consumer Confidence Index (CCI) data which stood at 117.8, a slight increase from the previous month.

Josua Pardede explained that this condition was supported by improving public perceptions of current economic conditions and stable expectations of future economic conditions. In addition, according to him, retail sales also showed a positive increase, mainly driven by demand during school holidays, Eid al-Adha National Religious Holidays (HBKN), as well as mid-year promotions.

"In terms of the manufacturing industry, the Prompt Manufacturing Index (PMI-BI) shows that the manufacturing sector remains expansionary with a PMI of 50.89%, driven by maintained production volumes and total orders," he told Suar, (18/7/2025).

Chief Economist of Permata Bank, Josua Pardede/Personal Doc.

However, Josua Pardede cautioned that this outlook is also characterized by crucial challenges. One of them is slowing global demand that could affect exports, especially due to the potential for new tariff policies from the United States.

"Nevertheless, some regions such as Java and Sumatra responded to these challenges with a strategy of front-loading exports to the US, which has the potential to maintain export performance until the end of the year," he said.

Crucial Strategy to Maintain Business Growth

In maintaining optimism and growth in the business world until the end of 2025, Josua Pardede highlighted several crucial things that need to be observed by business actors and the government:

• Consistency in Maintaining People's Purchasing Power: The government needs to consistently maintain people's purchasing power through fiscal incentives and social assistance. Private consumption is still the main pillar of the economy, supported by the disbursement of the 13th salary for ASN as well as economic stimulus such as transportation subsidies and thickening social assistance.
• Attention to Inflation: Inflation in the second quarter of 2025 was still under control at 1.88% (yoy). However, the risk of an increase in administered prices (AP) inflation along with the end of the government tariff discount policy needs to be watched out for. Policy coordination in controlling inflation, especially food inflation through TPIP and TPID, is very important.
• Anticipate Global Uncertainty: Business players must anticipate global uncertainties, especially related to the risk of tariff policies from the US. Diversification of export markets, optimization of domestic markets, and increasing competitiveness through downstream industries are key. Josua cited the positive potential of mineral downstream investment in the Sulampua, Kalimantan, and Balinusra regions.
• Strengthening Banking Intermediation: Need to continue to strengthen banking intermediation through increased access to financing to potential sectors such as manufacturing, agriculture, and trade. Liquidity challenges and moderation of banking lending appetite must be addressed with measurable incentive policies, such as the Macroprudential Liquidity Incentive Policy (KLM).
• Digitalization Push: Strengthening digitalization in payment systems and economic transactions should continue to be encouraged. Significant growth in the volume of digital payment and QRIS transactions by mid-2025 has the potential to increase overall economic efficiency.