Indonesia’s economic growth slowed in Q1 2025, prompting the government to take swift action to safeguard household consumption. According to the Central Statistics Agency (BPS), the economy grew by only 4.87% year-on-year—down from 5.02% in Q4 2024 and 5.11% in Q1 2024. The decline signals the need for stronger stimulus to support purchasing power and maintain economic momentum.
Weakened Household and Government Spending
Amalia Adininggar Widyasanti, Head of BPS, explained that the sharp decline in government consumption—recorded at -1.38%—was a primary factor in the slowdown.
“The absence of election-related spending, unlike last year, significantly reduced government expenditure. This had a notable impact on GDP,” said Amalia during a BPS press briefing.
Household consumption, which contributes the most to GDP, also slowed to 4.89%, a clear sign that economic uncertainties and inflation are weighing on people’s spending behavior.
Government Rolls Out Wage Subsidy (BSU)
In response, the government—through the Coordinating Ministry for Economic Affairs—has announced the reintroduction of the Wage Subsidy Assistance (BSU) program for workers earning below Rp3.5 million (around USD 220/month). This is aimed at preventing a further decline in consumption among the lower-income population.
Airlangga Hartarto, Coordinating Minister for Economic Affairs, stated that the BSU targets formal-sector workers most affected by the economic downturn.
“BSU is not just social aid; it’s a stimulus to keep household consumption moving. The government prioritizes low-income workers as they are the most vulnerable,” Airlangga emphasized.
In addition to BSU, the government plans to accelerate the disbursement of the 13th salary for civil servants and the distribution of existing assistance programs such as the Family Hope Program (PKH) and Food Assistance Cards.
Rising Unemployment, Stalled Job Creation
The job market is also showing signs of strain. As of February 2025, BPS reported 7.28 million unemployed people, or 4.76% of the labor force—up from 4.60% in February 2024. The data suggests that economic growth is not yet translating into adequate job creation.
To address this, the government is launching initiatives like the Job Expansion Task Force and a Presidential Instruction on Deregulation to simplify business licensing and encourage job creation. However, the effectiveness of these measures depends on their actual implementation.
Calls for Structural Reforms
Economic observers warn that without bold reforms, achieving the government’s 5.2% GDP growth target for 2025—as stated in the state budget—may be out of reach.
Ajib Hamdani, a policy analyst with the Indonesian Employers Association (Apindo), commented:
“With the current trend, the 5.2% target is ambitious. We need real breakthroughs—not just short-term stimulus.”
Long-term measures focused on productivity, investment, and structural reform are seen as more sustainable solutions to stimulate robust economic growth.
إِنَّمَا الْأَعْمَالُ بِالنِّيَّاتِ، وَإِنَّمَا لِكُلِّ امْرِئٍ مَا نَوَى
Artinya: “Sesungguhnya segala amal tergantung niatnya, dan setiap orang akan mendapatkan sesuai dengan apa yang diniatkan.”
[HR. Bukhari dan Muslim]
