IMF Staff Country Reports

The 2024 Article IV Consultation highlights that Indonesia’s growth remains strong despite external headwinds. Inflation is firmly in the target range and the financial sector is resilient. The authorities have been pursuing an ambitious growth agenda to reach high-income status by 2045. This comprises public spending, institutional reforms, and Industrial Policy. Risks are broadly balanced. Key downside risks include persistent commodity price volatility from geopolitical shocks), an abrupt slowdown in Indonesia’s key trading partners, or adverse spillovers from tighter-for-longer global financial conditions. A slightly narrower deficit would support both growth and a more balanced policy mix. The policy rate is above neutral; with financial risks contained, accommodative macroprudential policy has supported credit growth while liquidity remains comfortable. Monetary policy should remain data-driven, based on the evolution of domestic conditions, and the exchange rate serving as a shock absorber. Bridging structural gaps will be needed to achieve higher and inclusive potential growth and reach high income status, as envisaged in the country’s national development strategy—the Golden Vision 2045.