Indonesia's economy demonstrated resilience in the first quarter of 2025, growing at an annual rate of 4.9 percent, as reported in the June 2025 edition of the Indonesia Economic Prospects (IEP) report titled "People-First Housing: A Roadmap from Homes to Jobs to Prosperity in Indonesia." Despite global challenges, strong macroeconomic policies have played a crucial role in maintaining economic stability.
These policies include low inflation, adequate financial buffers, and strict adherence to fiscal rules. While economic growth has benefited poorer groups, middle-class households have experienced slower consumption growth. The focus on creating better jobs that uphold middle-class living standards is seen as essential for future prosperity.
Carolyn Turk, World Bank Division Director for Indonesia and Timor-Leste, commented on the situation: “Indonesia’s current economic performance reflects its strong fundamentals and sound policy response.” She emphasized that structural reforms aimed at boosting efficiency and productivity could enhance growth prospects and create more jobs.
The IEP report projects an average annual growth rate of 4.8 percent for Indonesia's economy from 2025 to 2027. Investment is expected to rise due to the government's housing initiative and the establishment of a new sovereign wealth fund named Danantara. However, potential risks such as global trade challenges and commodity price volatility could impact this outlook.
To mitigate these risks, the government is focusing on deregulation and creating a conducive business environment through trade and digital reforms. These efforts aim to increase growth rates to 5.5 percent annually by 2027 while stimulating demand through priority programs.
The report highlights the housing sector's potential as a driver for inclusive growth. The government's target of delivering three million housing units annually aligns with its "people-first" strategy. With an annual public investment of $3.8 billion, this program could generate over 2.3 million jobs and attract $2.8 billion in private capital while enhancing living conditions for many Indonesians.
Habib Rab, Lead Economist at the World Bank in Indonesia, stated: “Indonesia’s housing program is not only about building homes—it’s also about building a stronger, more inclusive economy.” He noted that aligning housing policy with infrastructure development, finance reform, and disaster resilience can open new pathways to prosperity.