Indonesia’s Economic Outlook for 2025

Indonesia’s Economic Outlook for 2025: Growth, Trends, and Opportunities

  • InCorp Editorial Team
  • 3 January 2025
  • 7 minutes reading time

Indonesia’s economic outlook for 2025 is promising, reflecting the country’s ability to adapt and innovate. As one of the largest economies in Southeast Asia, Indonesia is projected to achieve GDP growth of 5.1% to 5.4%, driven by robust domestic consumption and strategic export diversification.

With its youthful population and increasing investments in technology and infrastructure, Indonesia is set to make significant strides in economic growth. This industry outlook examines the key economic factors, top growth sectors, trends shaping the nation’s trajectory, and challenges and opportunities.

Key Economic Factors Shaping Indonesia’s Industry Outlook in 2025

Indonesia’s economic resilience is rooted in internal and external factors, which will determine its financial performance in 2025.

Macroeconomic Stability

Macroeconomic stability is a cornerstone of Indonesia’s economic growth. With inflation contained at around 3% and fiscal deficits reduced to 2.7% of GDP, the Indonesia economic outlook reflects resilience against global uncertainties.

Expanding Domestic Consumption

Domestic consumption, contributing over 56% of GDP, is central to the Indonesia economy. Urban growth and a rising middle class increase demand in key sectors such as housing, digital services, and consumer goods. This trend reinforces the positive economic outlook for sustained growth.

Infrastructure Revolution

Infrastructure investments exceeding $420 billion are transforming Indonesia’s connectivity. Improved roads, ports, and renewable energy facilities are essential for strengthening the Indonesia industry outlook. These developments not only promote economic integration but also attract foreign investment.

Export Diversification

Indonesia is actively expanding beyond traditional commodity exports like coal and palm oil. Exports of manufactured goods and electronics are projected to rise by 20%, reflecting efforts to strengthen the Indonesia economy through diversification.

Demographic Dividend

With over 70% of its population under 40, Indonesia boasts a vibrant workforce capable of driving innovation. The nation’s demographic advantage is key to its positive economic outlook, particularly in technology and digital services.

Policy Reforms

Pro-business reforms like the Omnibus Law enhance the ease of business in Indonesia. These measures streamline processes like company registration, strengthening the Indonesia industry outlook and fostering a favorable investment climate.

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Top Growth Industries in Indonesia for 2025

Indonesia’s Economic Outlook for 2025

Several sectors drive Indonesia’s economic growth, reflecting the nation’s evolving industry outlook and global positioning. These are:

Manufacturing

Manufacturing, contributing 19% of GDP, continues to be a pillar of the Indonesia economy. Investments in advanced manufacturing and eco-friendly practices enhance this sector’s competitiveness, positively impacting the overall economic outlook.

Agriculture and Agribusiness

The agriculture sector embraces modern technologies, increasing productivity by 15% and contributing to export growth. As one of the key drivers of Indonesia’s economic outlook, agribusiness is vital for rural and national development.

Digital Economy

Indonesia’s digital economy is set to grow to $146 billion by 2025, fueled by e-commerce, fintech, and SaaS platforms. This trend highlights the strong potential of Indonesia’s outlook in technology-driven sectors.

Mining and Energy

The mining and energy sectors are adapting to meet global sustainability demands. With nickel production increasing by 25%, Indonesia strengthens its position as a leader in green energy resources. Renewable energy investments also support the positive economic outlook.

Services: Logistics, Tourism, and Healthcare

Service sectors like logistics and healthcare are thriving alongside tourism, which aims to attract 18 million foreign visitors in 2025. These industries form a critical part of Indonesia’s economic outlook, reflecting opportunities for sustainable growth.

As Indonesia’s economy matures, several transformative trends are shaping its industries. These trends reflect global shifts, technological advancements, and evolving consumer preferences.

Artificial Intelligence (AI) Integration

AI is revolutionizing sectors like manufacturing and logistics. AI integration is vital for the Indonesian industry outlook, as it increases productivity through automation. By 2025, AI adoption is expected to rise by 30%, reflecting the digital economy’s impact on the overall economic outlook.

Sustainable Practices

Sustainability is shaping industries across Indonesia. From green manufacturing to eco-tourism, adopting sustainable practices is critical to maintaining a positive Indonesia economic growth trajectory.

Labor Market Evolution

Focusing on digital-first reskilling programs prepares Indonesia’s workforce for the demands of a tech-driven economy. These efforts align with Indonesia’s outlook for a stronger and more adaptable labor market.

Growing Role of SMEs

Small and Medium Enterprises (SMEs) are projected to contribute 40% of Indonesia’s GDP, supported by government-backed credit facilities and digital tools. Their success is integral to Indonesia’s strong industry outlook.

Urbanization and Smart Cities

Urbanization is reshaping Indonesia’s infrastructure and quality of life. Smart city initiatives enhance urban centers, reinforcing the Indonesia economic outlook as cities become hubs of innovation and investment.

Support for the Investment Climate

Indonesia’s investment landscape in 2025 is set to thrive, driven by political stability and economic recovery. Following the inauguration of President Prabowo Subianto and Vice President Gibran Rakabuming Raka, market optimism is high, boosting confidence in Indonesia’s capital markets.

Initial Public Offering (IPO)

The Indonesia Stock Exchange (IDX) aims to list 66 companies for Initial Public Offerings (IPOs) in 2025, building on the record 79 IPOs in 2023. This surge reflects growing interest from private firms and state-owned enterprises (BUMNs).

Strategic collaborations, such as programs with the Ministry of Tourism and Creative Economy and SME-focused initiatives, drive IPO activity.

IDX maintains strict requirements to ensure quality, emphasizing Environmental, Social, and Governance (ESG) compliance. In 2024, 70% of IPO applicants met these standards, underscoring the focus on sustainable business practices.

Broader Capital Market Development

IDX also expands its offerings, including derivatives and tailored financial products, to attract diverse investors. Introducing advanced technologies and investor protections aims to enhance liquidity and market depth.

Political and Economic Stability

With economic growth stabilizing at 4.95% (YoY) in Q3 2024 and easing monetary policies, Indonesia’s investment climate is becoming increasingly favorable. This combination of factors is expected to attract domestic and foreign investors to participate in Indonesia’s thriving capital markets.

Challenges Awaited in 2025

While Indonesia’s 2025 economic outlook is optimistic, several challenges could impact its growth. These domestic and international obstacles require careful navigation to maintain momentum.

Global Economic Uncertainty

Global inflation remains a concern as many developed nations, such as the U.S. and Europe, struggle to stabilize post-pandemic economies. Rising interest rates by central banks weaken currencies in emerging markets, including Indonesia, increasing import costs and production expenses.

Geopolitical Tensions

Ongoing conflicts like Russia-Ukraine and instability in the Middle East and North Africa pose risks to global stability. Escalating tensions between the U.S. and China over trade, technology, and Taiwan are straining international relations, impacting Indonesia’s trade strategies.

Trade and Energy Concerns

Trade disputes, especially between the U.S. and China, create supply chain challenges that impact Indonesia. Additionally, the global energy crisis, worsened by the Russia-Ukraine conflict, raises domestic production costs and affects consumer purchasing power. Transitioning to renewable energy is critical to reduce reliance on volatile fossil fuel markets.

Infrastructure and Workforce Gaps

Infrastructure in remote regions and a workforce needing more digital skills help economic development. Expanding infrastructure projects and scaling up reskilling programs are essential for equitable growth and industrial transformation.

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Unlock Indonesia’s Potential with InCorp

Growth opportunities and challenges mark Indonesia’s economic outlook for 2025. By leveraging its demographic advantages, adopting sustainable practices, and fostering technological innovation, Indonesia is poised for transformative growth.

However, addressing infrastructure gaps and global uncertainties will remain pivotal for long-term success. InCorp is your trusted partner in navigating Indonesia’s business landscape.

Our expert services ensure a seamless entry into this dynamic market so that you can focus on growth and success. We can assist you with:

  • Company Registration: Simplify the process of setting up your business in Indonesia with our comprehensive registration solutions tailored to meet local regulatory requirements.
  • Business License: Obtain all necessary licenses efficiently and hassle-free, ensuring compliance with Indonesian laws to help you operate confidently.

Take the first step toward capitalizing on Indonesia’s economic potential by filling out the form below.

Daris Salam

COO Indonesia at InCorp Indonesia

With more than 10 years of expertise in accounting and finance, Daris Salam dedicates his knowledge to consistently improving the performance of InCorp Indonesia and maintaining clients and partnerships.

Get in touch with us.

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Frequent Asked Questions

There are three things business owners need to consider before setting up a business in Indonesia: the type of business entity, capital requirements, and regulations.

Indonesian regulations separate local companies from foreign companies. Generally, foreign-owned companies (PT PMA) have more limitations than their local counterparts (Local PT). However, to pursue more foreign direct investment in the country, the government has taken several bold initiatives to increase the ease of doing business and provide numerous attractive incentives for foreign investors.

There are two main types, namely, primary business licenses and non-primary business licenses. The primary ones commonly apply to various industries, such as general and industrial business licenses. Additional non-primary ones are included, depending on the operations of your business. Examples of non-primary business licenses are operational and commercial licenses.

Yes, you must apply for it to be able to issue work permits for your foreign employees. This permanent business license is also a prerequisite for the applications for other business licenses and import licenses.