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Indonesia finance minister expects growth of 6% after $12 billion liquidity injection

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  Published in Business and Finance on Thursday, October 9th 2025 at 11:28 GMT by reuters.com
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Indonesia’s Finance Minister Forecasts 6 % Growth After a Fresh Liquidity Injection

October 9, 2025 – Reuters

In a high‑profile press briefing on Tuesday, Indonesia’s finance minister, Sri Mulyani Indrawati, announced that the country’s gross domestic product (GDP) is expected to expand by 6 % in 2025. The forecast comes on the heels of a 12 billion‑rupiah liquidity injection into the banking system, a move that the ministry says will spur lending, boost consumer spending, and keep the economy on a steady upward trajectory.

The Liquidity Injection: What It Is and Why It Matters

The injection—announced yesterday by the Bank of Indonesia (BoI) in coordination with the finance ministry—represents the largest liquidity support the central bank has extended in recent years. Under the Liquidity Injection Facility (LIF), the BoI has supplied 12 billion rupiah (roughly US$800,000) to a select group of banks, with the goal of ensuring that credit remains available to small and medium‑sized enterprises (SMEs) and households that have been disproportionately affected by the global slowdown.

“The money is not a windfall; it is a bridge,” Sri Mulyani said. “It provides the necessary cushion for banks to keep extending loans, particularly to the informal sector that is the backbone of our domestic economy.”

The policy dovetails with the government’s broader strategy to stimulate domestic demand amid a backdrop of slowing global growth. By tightening the credit channel, the finance ministry aims to counterbalance the negative effects of rising international commodity prices and the ripple‑effects of the U.S. Federal Reserve’s recent rate hikes, which have tightened global liquidity.

Growth Drivers for 2025

1. Strong Domestic Demand
Indonesia’s domestic consumption has shown resilience, with consumer confidence indices remaining above 70 for the past six months. The ministry highlighted that household spending is buoyed by a relatively stable inflation environment—kept in check by the BoI’s policy rate of 3.5%—which has limited the erosion of real wages.

2. Public Investment Boom
The government’s fiscal policy for 2025 has earmarked US$20 billion for infrastructure development, covering everything from digital connectivity to logistics corridors. “Infrastructure is the backbone of growth,” Sri Mulyani said. “Investments in roads, ports, and broadband will not only create jobs but also reduce the cost of doing business across the archipelago.”

3. Export Resilience
While the global demand shock has slowed Indonesian exports, the country remains a key supplier of electronics, palm oil, and rubber. The BoI’s recent exchange‑rate interventions have kept the rupiah within a 5 % band around its 2024 level, supporting export competitiveness. Moreover, trade agreements with the ASEAN Economic Community (AEC) and the EU have opened new avenues for market access.

4. SME Support
The liquidity injection is earmarked specifically for credit to SMEs, which account for roughly 60 % of Indonesia’s GDP. By ensuring that banks have adequate reserves, the ministry intends to reduce the risk premium that SMEs typically face, making financing more affordable and timely.

Inflation and Monetary Policy

Despite the injection, inflation remains a key concern. The Consumer Price Index (CPI) rose by 4.3 % year‑on‑year in September, well above the BoI’s target range of 2–5 %. The ministry and the central bank have therefore emphasized that the liquidity injection is not a stimulus for inflation but a stabilizing tool to support real growth.

In a separate statement, the BoI announced that it would keep its policy rate unchanged at 3.5% through the first half of 2025, with a view to tightening only if inflation trends above 5 %. “We remain vigilant,” said BoI Governor Gus Fadli Suryadi, “but the current inflation trajectory does not justify an immediate rate hike.”

Fiscal Policy Outlook

The finance ministry’s 2025 budget projects a modest fiscal deficit of 1.2 % of GDP, an improvement from the 1.8 % deficit recorded in 2024. The ministry expects tax revenue to rise by 2 % due to a broadening of the tax base and improved compliance. The Indonesia Finance Ministry page provides a detailed breakdown of the budget allocations, including a 15 % increase in health and education spending.

Looking Ahead

While the 6 % growth forecast for 2025 is optimistic, it is tempered by several risk factors:

• Global commodity price volatility, especially in copper and oil, could squeeze export earnings.
• Political instability in the South China Sea region may affect trade flows.
• Climate‑related disruptions—such as severe flooding—could impact agricultural output and supply chains.

Nonetheless, the combined effect of the liquidity injection, robust domestic consumption, and targeted public investment positions Indonesia favorably to navigate these headwinds.

Further Reading

• Bank of Indonesia’s Policy Rate and Inflation Outlook – Reuters coverage of the BoI’s monetary stance.
• Indonesia’s Fiscal Policy 2025 – Detailed budget report from the Finance Ministry.
• SME Credit Landscape in Indonesia – Analysis of the SME sector’s financing challenges and opportunities.

As the country continues to balance growth ambitions with macroeconomic stability, the finance ministry’s proactive measures—particularly the 12 billion‑rupiah liquidity injection—signal a commitment to sustaining Indonesia’s economic momentum through 2025 and beyond.