Indonesia’s Growth Outlook Strengthens Amid Rate Cuts and US Trade Deal
- brg_news_room
- Jul 17
- 1 min read
Indonesia: Indonesia is emerging as a key investment destination following a strategic blend of monetary easing and a favourable US trade deal. Bank Indonesia cut its benchmark interest rate to 5.25% in July 2025, following a previous reduction in May, marking the most accommodative policy since 2022. This move aims to stimulate domestic demand, which slowed to 4.89% in Q1 2025, while inflation remains within the 1.5–3.5% target range. The rupiah has stabilized at around 16,280 IDR/USD, helping create favourable conditions for credit-driven sectors such as construction and consumer finance. Further rate cuts in 2026 are likely, contingent on global economic stability.
Simultaneously, a new trade agreement with the US has lowered tariffs on Indonesian exports to 19%, down from a proposed 32%, boosting competitiveness in manufacturing and agriculture sectors like textiles, palm oil, and rubber. Key sectors poised for growth include manufacturing (e.g., Indorama, Astra), energy (coal, nickel), and consumer staples (e.g., Indofood, PT Sampoerna). With government bonds yielding around 6.5% and a narrowing yield spread versus US Treasuries (~200 basis points), investors are eyeing equities, the rupiah, and fixed-income instruments. However, potential risks remain from global trade tensions, subdued household spending, and geopolitical instability.
Source: AInvest
