World Bank predicts steady growth for Indonesian economy in the next two years

According to a World Bank report released on Monday, Indonesia’s economy is predicted to experience steady growth over the next two years despite weak exports. The growth is expected to be driven by domestic consumption and investment. In the first quarter of 2024, election-related spending and household spending contributed to a 5.11 percent expansion in Southeast Asia’s largest economy.

The report forecasts a five percent expansion in Indonesia’s economy this year, followed by a 5.1 percent growth in both 2025 and 2026. These numbers represent an increase from the World Bank’s previous estimates. The report also highlighted some risks to the economy, such as high interest rates and geopolitical shocks that could impact exports negatively.

World Bank senior economist Wael Mansour cautioned that while the outlook is stable, there are risks that could tilt the economy downwards. The report assumes a significant contribution from public consumption, with government spending expected to increase. Foreign direct investment is also projected to return to pre-pandemic levels, thanks in part to Indonesia’s credible fiscal rule attracting investments and lowering risk premiums.