The International Monetary Fund Executive Board concluded the 2025 Article IV consultation with Indonesia and published the associated staff report, assessing the economy as resilient despite a challenging external environment. Growth is projected to remain steady at 5.0 percent in 2025 and 5.1 percent in 2026, with inflation expected to stay within the target range and the current account deficit contained alongside comfortable reserves, although risks are tilted to the downside. Directors supported prudent fiscal policy anchored by credible fiscal rules, highlighting the need for careful spending execution, stronger revenue mobilization, and limits on below-the-line and quasi-fiscal activities to clarify the overall fiscal footprint and strengthen the effectiveness of the rules. They called for robust governance and accountability frameworks around Danantara to prevent the buildup of contingent liabilities and quasi-fiscal activities. On monetary policy, easing through 2025 was viewed as warranted, with a data-dependent stance encouraged going forward; the exchange rate should continue to act as a shock absorber, with foreign exchange intervention reserved for limited shocks while preserving reserve buffers. They also backed efforts to deepen financial markets, including gradually lowering Bank Indonesia’s presence in the government debt market over the medium term, supported an accommodative macroprudential stance amid a negative credit gap with a gradual move toward neutral as credit growth recovers, and underscored structural reforms including greater trade openness and a transition away from non-tariff trade measures.

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