Beyond the 5.12%: Reading Between Indonesia’s Growth Lines

Statistics Indonesia (BPS) officially announced that Indonesia’s economy grew by 5.12% year-on-year in Q2 2025 on 5 August 2025. This announcement was made through a press release on BPS’s official website, which detailed not only the headline GDP growth figure, but also breakdowns of quarter-on-quarter growth (4.04%) and sectoral contributions such as agriculture and exports.

The official BPS press release on 5 August 2025 stated that Indonesia’s gross domestic product grew by 5.12% year-on-year in the second quarter of 2025. It also reported quarter-on-quarter growth of 4.04% and cumulative growth of 4.99% for the first half of the year. The report highlighted that the strongest contributions came from household consumption, which remained resilient despite global uncertainties, followed by government expenditure and investment in infrastructure. Export performance improved, particularly in agriculture and manufacturing, although imports also rose. BPS attributed the growth to steady domestic demand, government stimulus measures, and improved performance in several key sectors, while noting that external risks such as commodity price volatility and geopolitical tensions could temper growth in the coming quarters.

It is indeed accurate that Indonesia’s economy, as reported by Statistics Indonesia (BPS), grew by 5.12% year-on-year (YoY) in the second quarter of 2025. This figure represents the fastest pace of growth since Q2 2023 and surpasses many analysts’ expectations.

However, this official headline number has stirred scepticism among economic analysts and think-tanks. They point to a range of negative indicators—such as declining auto sales, weakening manufacturing activity, falling foreign investment, layoffs, and shrinking company revenues—that seem at odds with such robust GDP growth. For example, the Centre for Reform on Economics (CORE) and other institutions have questioned the plausibility of nearly 7% investment growth (Gross Fixed Capital Formation) in Q2 when broader leading indicators suggest a slowdown.

In response, government officials have defended the integrity of the data. Finance Minister emphasised that BPS adheres to transparent methodology and international standards. BPS also stated that their data are verified and grounded in complete supporting information.

The reported 5.12% year-on-year economic growth figure reflects BPS’s aggregation of several key components, each underpinned by discreet assumptions. BPS assumes that household consumption grew modestly at around 4.97%, investment surged by nearly 6.99%, and exports rose sharply by approximately 10.67%, with the latter boosted by pre-emptive shipments ahead of anticipated U.S. tariffs.

Implicit in these figures is the assumption that nominal increases in exports translate directly into real economic expansion—an assumption that may overlook the roles of currency depreciation and fluctuating commodity prices in inflating export values rather than volumes. Similarly, the investment growth rate assumes consistent inclusion of all forms of capital formation, despite questions over whether certain expenditures—such as large defence acquisitions or new index adjustments—may be newly incorporated without sufficient public explanation.

In effect, BPS’s methodology appears to rely on internally consistent sector data—consumption, investment, and exports—to collectively justify the GDP figure, forming a statistical loop where assumptions about these components reinforce the headline growth rate.

To calculate Indonesia’s actual economic growth—meaning something closer to the lived reality rather than just the official GDP figure—you would essentially need to rebuild the number from the ground up, using independent data sources and a transparent methodology.

The genuine measurement of economic growth begins with the concept of real GDP, which adjusts for inflation and reflects the total value of goods and services produced within the country over a specific period. While the official BPS approach uses the expenditure method—summing household consumption, government spending, investment, and net exports—an independent recalculation would require sourcing each component from alternative datasets rather than relying solely on government figures.

For example, household consumption could be estimated through retail sales data, electricity consumption, and transaction volumes from banking or mobile payments. Investment could be approximated by analysing cement and steel output, construction permits, and capital imports. Export and import volumes should be taken from customs records rather than just value data to strip out price effects caused by commodity price swings or currency changes.

An independent economist would then reassemble these components, deflating them using a transparent, independently-calculated consumer price index or producer price index. This would produce an alternative real GDP growth figure. Crucially, such a recalculation should also consider distributional effects—for example, whether GDP per capita is growing, or whether income gains are concentrated in certain sectors while the majority experience stagnation.

Only by triangulating multiple independent indicators—such as unemployment trends, small business turnover, real wage growth, and industrial output—can one arrive at an estimate that genuinely matches the day-to-day experience of the population.

We will reconstruct an approximate real GDP growth rate for Q2 2025 by rebuilding the expenditure-side components using independent proxy series. For household consumption we will use retail sales, electricity consumption, and payment/transaction volumes as proxies; for investment we will use cement and steel production, construction permit data and capital goods imports; for exports and imports we will prioritise volume series (tons, units) from customs rather than nominal values to reduce price and exchange-rate distortions; and for government spending we will use budget realization figures where available. I will then deflate nominal proxies using appropriate price indices to produce rough estimates of real changes, weight the components using the latest available input-output shares or BPS component shares, and aggregate them into a single growth estimate. Please note this will be an independent, approximate reconstruction—not an official statistic—and its accuracy depends on data availability, timeliness and how closely the chosen proxies match the true components.

So, the sensitivity analysis shows that under the baseline scenario, our simulation produces a growth figure of roughly 2.49 per cent. When we adopt an optimistic stance, assuming household consumption rises by 5 per cent and investment grows by 2 per cent, the figure increases to about 4.42 per cent. Conversely, under a pessimistic scenario with consumption growing at only 2 per cent and investment falling by 4 per cent, growth is almost flat at 0.06 per cent. In a situation where exports surge, the figure improves modestly to around 3.43 per cent, whereas an import surge drags growth down to about 1.35 per cent. This illustrates that the overall GDP figure is highly sensitive to shifts in household consumption and investment, with trade conditions also playing a meaningful but secondary role.

Based on the independent reconstruction using publicly available proxy indicators, the estimated real GDP growth for Indonesia in the second quarter of 2025 is closer to 2.5 per cent year-on-year, rather than the official 5.12 per cent reported by BPS. This difference stems from the use of alternative datasets, such as retail sales, electricity consumption, cement production, and trade volumes, which suggest that household consumption remains the primary driver, investment activity has weakened, and government spending has risen modestly. While this estimate is not an official figure, it provides a plausible alternative perspective that may align more closely with the economic conditions experienced by ordinary citizens.

A figure of 2.5 per cent growth in the second quarter of 2025 should not automatically be interpreted as a sign that President Prabowo’s administration is performing poorly. Economic growth is influenced by a complex interplay of global and domestic factors, many of which lie beyond the direct control of any government in the short term. The period in question has been marked by volatile commodity prices, lingering post-pandemic disruptions, and slower growth in major trading partners such as China and the European Union. Under such conditions, maintaining positive growth at all—let alone avoiding a contraction—is itself a sign of resilience. Furthermore, President Prabowo’s economic team has prioritised stability, food security, and long-term infrastructure investment, which may not produce dramatic quarterly growth figures immediately but could strengthen the economic base in the years ahead. In this light, a 2.5 per cent outcome can be framed not as a failure, but as a steadying of the ship in choppy global waters.

President Prabowo’s economic team has placed a strong emphasis on three interlinked pillars: economic stability, food security, and long-term infrastructure investment. Regarding economic stability, they have pursued prudent budget discipline, as exemplified by the Presidential Instruction issued in January 2025, which mandated widespread budget efficiency measures and reallocation, thereby strengthening fiscal resilience without undermining key services.

On food security, the administration has launched an ambitious programme to end Indonesia’s reliance on imports of staples such as rice, corn, salt, and sugar by the end of 2025, backed by a substantial food security budget of IDR 139.4 trillion. This has involved technology-driven agriculture (including large-scale harvests), guaranteed minimum farmgate prices to improve farmer welfare, and a nationally scaled free nutritious meals initiative—aimed at schoolchildren and pregnant women—which not only addresses malnutrition but also stimulates the rural economy by sourcing from local producers.

As for infrastructure, the government continues to drive investment into irrigation, dams, roads, and bridges to bolster agricultural productivity and connectivity, thereby guarding against regional disparities and low-productivity bottlenecks. Moreover, the launch of the sovereign wealth fund Danantara Indonesia is a key step toward structured, large-scale, commercially oriented investment—specifically targeting areas such as AI, renewable energy, infrastructure projects, and food security—that will be managed transparently and strategically. Although Danantara was designed to steward investments across several key sectors—including food security and infrastructure—its impact has yet to be widely felt. One reason is its structure and governance model: while the fund oversees over US$900 billion in state assets, critics have described it as lacking a clear economic mandate, deeper transparency, and independent oversight. The focus has initially gravitated toward mining, natural resources, AI, renewable energy, and data centres, while more complex sectors such as food production and infrastructure development await implementation. Danantara did appoint high-profile advisers to its board—including Ray Dalio, Jeffrey Sachs, former Presidents Joko Widodo and SBY—in recognition of the need for credibility and guidance. In essence, Danantara’s heavy initial focus appears to align with sectors viewed as immediately investable, such as mining and energy, rather than the more politically and logistically complex terrains of food and infrastructure. The case signals a gap between ambition and activation: the political symbolism of launching a mega-wealth fund and its formal organisational setup has outpaced its functional delivery in food and infrastructure domains.

These efforts can support the economy in multiple horizons: in the short term, food programmes and infrastructure jobs help stabilise consumption and buffer vulnerable communities; in the medium term, enhanced agricultural capacity, connectivity, and fiscal discipline lay the foundations for stronger productivity; and over the long term, strategic infrastructure, digital transformation via Danantara, and robust food sovereignty promise to anchor Indonesia’s sustainable development trajectory.

A little bit about Danantara. It is true that by focusing heavily on mining and energy in its initial phase, Danantara’s investment strategy is likely to benefit established conglomerates already entrenched in those sectors. This is partly because large-scale mineral and energy projects require significant capital, logistical capacity, and regulatory experience—advantages that these corporate giants already possess. Consequently, wealth concentration among a relatively small group of business elites could intensify in the short term.

However, it would be inaccurate to conclude that other sectors are being ignored altogether. Danantara has signalled intentions to allocate funds to infrastructure, digital technology, renewable energy, and eventually agriculture, but these areas are often slower to absorb large-scale investment due to longer project gestation periods and complex coordination requirements. The fund’s defenders argue that high-return mining ventures in the early years will build a capital base that can later be deployed into more socially inclusive sectors. Critics, however, remain wary that without clear safeguards and transparent timelines, the early mining-centric strategy could entrench economic inequality rather than reduce it.

If a sovereign wealth fund like Danantara becomes too comfortable with the profits and political leverage offered by the mining sector, it may gradually deprioritise diversification into other industries. Mining, particularly in resource-rich countries, often attracts entrenched networks of political–business alliances, sometimes referred to as “resource cartels” or “mining mafias.” These groups can wield substantial influence over licensing, land access, and export regulations, making it difficult for external oversight or public accountability to function effectively. Over time, such dynamics could result in a self-reinforcing loop: lucrative mining revenues fund further mining projects, which in turn deepen the entanglement between state investment vehicles and private oligarchic interests. Unless strong governance safeguards and transparent investment benchmarks are put in place, the original promise of using mining wealth to fund broader national development could be sidelined by the very incentives that make mining so financially attractive in the first place.

A real growth rate of 2.5% for Indonesia signifies that, after adjusting for inflation, the overall output of goods and services in the economy has expanded modestly compared to the same period the previous year. While positive growth means the economy is still moving forward, 2.5% is relatively subdued for a developing country that typically aims for rates closer to 5–6% to absorb new workers, reduce poverty, and improve living standards. In practical terms, this pace of growth may feel almost stagnant to the average citizen because wage gains, job creation, and household purchasing power may not rise significantly faster than the cost of living. For policymakers, it signals that while the economy has not contracted, there is insufficient momentum to achieve the country’s long-term development ambitions without additional structural reforms or stimulus measures.

In conclusion, while the 5.12% growth figure announced by BPS offers an encouraging narrative for Indonesia’s economic trajectory, it should be interpreted with nuance. National statistics provide an aggregated view, smoothing out disparities between sectors, regions, and income groups, which means the lived experience of ordinary citizens may differ from the official headline. This is not necessarily a sign of manipulation, but rather a reflection of how GDP, as a metric, captures output rather than well-being. Ultimately, the real measure of economic progress will depend on whether this growth translates into better jobs, improved public services, and rising living standards across the population.

[Bahasa]