KBRN, Jakarta: The World Bank has raised its forecast for Indonesia’s economic growth, projecting the economy to expand by 5 percent in 2025–2026 before climbing to 5.2 percent in 2027.

The upgraded outlook, published in the December 2025 edition of the Indonesia Economic Prospects (IEP) report, marks an improvement from the June forecast of 4.7 percent in 2025, 4.8 percent in 2026, and 5 percent in 2027.

“Despite global uncertainty, Indonesia’s economy has proven resilient. GDP growth remains around 5 percent annually, higher than the average for middle-income countries. This is good news,” said Carolyn Turk, the World Bank Country Director for Indonesia and Timor-Leste, in Jakarta on Tuesday, December 16, 2025, as quoted by Antara.

The report attributes the stronger outlook to rising investment and export performance, which are expected to offset slightly weaker private consumption.

Public investment through the state-backed Danantara program, accommodative monetary policy to spur private-sector credit, and steady inflows of foreign direct investment are highlighted as key drivers. Low inflation and fiscal stimulus are also expected to support household spending.

However, labor market challenges continue to weigh on household welfare. Employment rose 1.3 percent between August 2024 and August 2025, but most new jobs were concentrated in lower-wage sectors. Real wages have declined since 2018, while mid-skilled employment has shrunk relative to both low- and high-wage positions, dampening household consumption.

Turk stressed that Indonesia must combine macroeconomic stability with deeper structural reforms to strengthen its growth capacity and create better-paying jobs for young workers. One priority identified in the report is the expansion of digital infrastructure, including broadband networks, data centers, and regulatory frameworks, to accelerate productivity and broaden economic opportunities.

“We believe Indonesia can drive faster productivity growth and expand opportunities by improving the quality and reach of its digital infrastructure,” Turk said.

“A stronger digital ecosystem will generate new jobs in the tech sector and create multiplier effects across the economy, particularly benefiting young people and women in underserved regions,” Turk added. ***