Indonesia has rolled out a $1.5 billion stimulus package aimed at bolstering consumer spending and sustaining economic growth, as Southeast Asia’s largest economy faces mounting pressure from weakening commodity prices, tepid trade, and global uncertainties. The details of the stimulus plan were first reported by the Financial Times.
The Rp24.44 trillion ($1.5 billion) package, which went into effect Thursday, includes a range of temporary benefits such as transportation fare discounts, wage subsidies for millions of households, toll road reductions, and expanded social aid for the country’s most vulnerable citizens. The government plans to maintain the measures for two months, targeting the school holiday period to stimulate travel and domestic consumption.
Finance Minister Sri Mulyani Indrawati said the initiative is designed to support household consumption and boost GDP in the second quarter. “We hope that in the second quarter economic growth can be maintained close to 5 per cent,” she said earlier this week.
The push comes amid growing skepticism about Indonesia’s ability to maintain its long-standing annual growth rate of 5 percent. In the first quarter of 2025, GDP growth slowed to 4.9 percent—the weakest pace in over three years, according to the Financial Times.
Indonesia’s challenges are being compounded by global headwinds, including an intensifying trade dispute with the United States. President Donald Trump’s administration imposed a 32 percent tariff on Indonesian goods, which has been temporarily suspended until July. Jakarta is negotiating with Washington in hopes of easing the tariffs, offering to increase imports of American goods in exchange for lower trade barriers.
As the world’s largest exporter of nickel, coal, and palm oil, Indonesia has been heavily affected by falling commodity prices. Meanwhile, consumer sentiment has been hit by signs of a broader economic slowdown, with retail and auto sales weakening across the archipelago.
President Prabowo Subianto, who took office earlier this year, has pledged to boost economic growth to 8 percent annually. However, analysts say his flagship policies may be stretching the country’s fiscal resources. Government infrastructure spending has been reduced to help fund Prabowo’s ambitious $28 billion free meals programme, aimed at serving over 82 million children and pregnant women daily. While the programme is expected to stimulate local economies, it has yet to show broad economic impact.
Indonesia’s central bank, Bank Indonesia, has adjusted its annual growth forecast downward, now projecting GDP expansion of between 4.6 and 5.4 percent. It has already cut interest rates by 50 basis points this year to 5.5 percent and may ease policy further at its June meeting to support demand.
However, economists remain cautious about the short-term effects of the latest stimulus.
“We still expect GDP growth to slow further to 4.7–4.8 percent in the second and third quarters,” said Bank of America in a recent note.
Brian Lee Shun Rong, an economist at Maybank Investment Banking Group, noted that the stimulus could help low-income households, but said its broader impact might be limited. “Consumer sentiment remains fragile amid the ongoing economic and job market uncertainty, which could make households reluctant to loosen their purse strings,” he said.
Lee added that more aggressive monetary and fiscal measures may be necessary to reverse the economic deceleration, especially as global trade is expected to weaken further in the second half of the year.
The government’s latest move highlights the balancing act Prabowo’s administration faces: delivering on ambitious social programmes while trying to safeguard economic stability in an increasingly volatile global environment.
