Indonesia’s first quarter GDP growth slowest in over 3 years

Indonesia’s economy grew at its weakest pace in more than three years in the first quarter, with headwinds expected in the rest of the year stemming from global trade turmoil and declining household spending.

Southeast Asia’s largest economy grew 4.87% in the first quarter from a year earlier, its slowest rate since the third quarter of 2021 and down from 5.02% in the previous quarter. Growth was roughly in line with analysts’ forecasts in a Reuters poll at 4.91%.

President Prabowo Subianto, who took office last year, has pledged to lift GDP growth to 8% during his five-year term, but is facing challenges from slowing global growth amid a trade war, as well as weakening domestic demand and a tighter budget position.

U.S.-bound exports could also be hit by hefty tariffs in coming months, which Jakarta is looking to avert in talks with Washington.

“Various challenges are already in sight, such as the negative impact of trade war tensions between the US and its trading partner countries, including Indonesia,” said Myrdal Gunarto, Maybank Indonesia economist.

Global market uncertainties may also limit the central bank’s room to ease monetary policy, he said.

Bank Indonesia has cut interest rates twice since September and has said it has room to cut further, though its priority was maintaining market stability.

Hosianna Situmorang, Bank Danamon’s economist, said further growth deceleration to 4.79% is expected in the current quarter on slowing household spending and the impact of trade tensions. However, she kept Danamon’s 4.8% full-year forecast, expecting improvements in the second half of 2025.

“We see indications of improvement coming from easing trade tensions, since investors are predicting China would negotiate (with the US). The government should also begin to accelerate spending,” she said.

Chief economic minister Airlangga Hartarto told reporters Indonesia’s growth remained higher than peers in the Group of 20 major economies, and that government spending would provide growth momentum going forward.

On a non-seasonally adjusted, quarter-on-quarter basis, GDP contracted 0.98%, Statistics Indonesia data showed.

In the first three months of 2025, household spending, which makes up over half of the country’s GDP, grew 4.89% annually, down just slightly from the previous three months, but marking the slowest pace in five quarters. That was despite higher spending during Ramadan, which fell in March this year.

Spending on eating out, transportation and communication remained strong, but other spending, such as footwear purchases, was sluggish, Statistics Indonesia said.

While the GDP data suggested stable purchasing power, other indicators suggested spending by urban middle class households was weakening, said Barra Kukuh Mamia, Bank Central Asia’s economist.

First-quarter investment growth slipped to 2.12%, its lowest in two years. Government spending contracted, but there was an increase in the net export contribution to GDP due to slowing imports.

The mining sector shrank about 1%, affected by a drop in coal prices.

The agriculture sector provided one bright spot, with 10.5% growth, boosted by stronger rice and corn harvests. (Reporting by Stefanno Sulaiman, Gayatri Suroyo and Bernadette Christina; Editing by John Mair and Sonali Paul) Indonesia suspends eye-scanning Worldcoin crypto project Jakarta, May 5, 2025 (AFP) - Indonesian authorities said they have suspended Worldcoin, the eyeball-scanning cryptocurrency project co-founded by OpenAI chief Sam Altman under scrutiny in several countries.

Since Worldcoin launched in 2023, millions of people have had their iris patterns scanned to create a “World ID”, proving they are human and allowing them to conduct transactions.

The data is encrypted and safe, according to Worldcoin, but it has run into trouble over concerns about the use of personal data including in Hong Kong, Kenya, Spain and Portugal.

Indonesia’s suspension, announced on Sunday, followed reports from the public over suspicious activities on the platform, a communication and digital ministry official said.

“The freezing is a preventive measure to prevent potential risk to the public,” said Alexander Sabar, the ministry’s director general for digital space supervision.

The government will also summon Worldcoin’s local operators, PT Terang Bulan Abadi and PT Sandina Abadi Nusantara, to provide clarification over their activities, he said.

The project aims to solve one of the main challenges facing the crypto industry that largely relies on pseudonyms to operate, leaving it vulnerable to spam bots and scams.

Reuters