Indonesia Launches $1.5 Billion Stimulus to Revive Economy Amid Slowing Growth and Trade Tensions
Indonesia has unveiled a $1.5 billion economic stimulus package in a bid to reignite domestic consumption after the nation posted its slowest GDP growth since the pandemic-era slump of 2021.
The initiative, rolled out on Thursday, comes as the country grapples with rising global economic headwinds and internal fiscal challenges.
According to official data, Southeast Asia’s largest economy expanded by just 4.87% year-on-year in the first quarter of 2025, falling short of government targets and marking the weakest performance in over three years.
Analysts have attributed the downturn to sluggish consumer spending and export uncertainty amid escalating trade tensions with the United States.
The stimulus package, spearheaded by President Prabowo Subianto’s administration, includes a wide array of measures aimed at boosting consumer confidence and economic activity. Key features include discounts on train, plane, and ferry travel, toll subsidies to encourage tourism, direct cash transfers to low-income workers, and additional social welfare disbursements.
The package also includes premium reductions on unemployment insurance, providing relief for workers amid economic uncertainty.
“The goal is to stimulate demand quickly, especially during the school holiday season,” said Finance Minister Sri Mulyani Indrawati. “With these targeted incentives and the acceleration of government programs, we hope to maintain GDP growth at close to 5% in Q2.”
The measures take effect immediately, with disbursements and discounts already underway.
Prabowo’s government has faced scrutiny over recent fiscal decisions, particularly the controversial move to slash $19 billion from the national budget to seed a new sovereign wealth fund. Critics warn the budget cuts could weaken essential infrastructure and social programs during a period of economic vulnerability.
The economic pressure is compounded by growing geopolitical uncertainty. Indonesia’s financial markets were rattled in April when U.S. President Donald Trump announced potential 32% tariffs on Indonesian exports, part of a sweeping protectionist shift dubbed “Liberation Day.” The Jakarta Composite Index suffered its steepest decline in over a decade following the announcement.
Trade negotiations between Jakarta and Washington are ongoing, with a 90-day grace period set to expire in July. To ease tensions and reduce its trade surplus with the U.S., Indonesia has pledged to increase imports of American goods, including wheat, liquefied natural gas (LNG), and liquefied petroleum gas (LPG).
The new stimulus package represents a crucial test of the Indonesian government’s ability to steer the economy through a storm of domestic budget constraints and external trade threats — all while maintaining the confidence of its citizens and international investors.
