Caution! Economic Growth May Decline To 4.8%

CNBC Indonesia/Arrijal Rachman

Caution! Economic Growth May Decline To 4.8%

Wednesday, 23 Apr 2025

The import tariff policy introduced by U.S. President Donald Trump is expected to hinder Indonesia's economic growth this year.

Although the government is awaiting the outcome of negotiations with the U.S., which are aimed to conclude within the next 60 days, the pressure on the domestic economy is anticipated to remain substantial.

Fithra Faisal Hastiadi, Chief Economist at Samuel Sekuritas Indonesia, believes that Trump's tariff policy could disrupt the global supply chain. Consequently, the demand for Indonesian products may weaken, ultimately impacting national economic growth.

"This year, achieving a growth rate of 5% is quite challenging. In fact, I have revised my projection down from 4.97% to 4.8%," Fithra stated to Kontan on Sunday, April 20.

Fithra remains hopeful that the negotiation process between the Indonesian government and the U.S. will yield a balanced solution. He suggests that if Indonesia agrees to increase imports from the U.S. to achieve a balanced trade (zero deficit), then the U.S. should reciprocate by imposing a 0% tariff on Indonesian products. However, he also points out potential non-tariff challenges, such as stricter regulations on the Domestic Component Level (TKDN) and import quota restrictions. He warns that quota policies are particularly susceptible to corruption.

"If trade policies must be implemented, it is preferable to use tariffs rather than quotas. Import quotas have become a means for 'rent-seeking,' benefiting primarily those holding licenses, which can lead to corrupt practices," he explained.

In addition to external pressures, the domestic economy is also facing challenges from household consumption.

Consumer purchasing power is perceived to be weak, as evidenced by a decline in the consumer confidence index for three consecutive months.

Typically, February and March are peak consumption periods due to Ramadan and Idulfitri; however, this year, the consumption trend has significantly declined.