Indonesia’s Growth to Outpace Regional Peers Despite Global Economic Slowdown: World Bank

Jakarta. The World Bank’s latest Global Economic Prospects report projects global economic growth to remain steady at 2.7 percent in 2025 and 2026, mirroring the pace expected in 2024. This growth is largely driven by a gradual decline in inflation and interest rates.

For Indonesia, the World Bank estimates a 5 percent growth in 2024, with 5.1 percent in both 2025 and 2026, outpacing the 4 percent average growth forecast for developing economies. However, these projections still fall short of pre-pandemic growth rates and are considered insufficient to address the challenges of poverty alleviation and broader development goals.

“Alongside decelerating activity in China, export growth is likely to slow most in countries that experienced the strongest rebounds—particularly in highly export-oriented economies such as Malaysia. In contrast, where trade growth was slower last year and economic activity relies more on domestic demand, including in Indonesia, steadier trade growth is expected over the forecast horizon,” the World Bank stated on Friday.  

Developing economies, which account for 60 percent of global growth, are projected to finish the first quarter of the 21st century with their weakest long-term growth outlook since 2000. The World Bank stated that while these economies are growing more important to the global economy—now contributing 45 percent of global GDP compared to 25 percent in 2000—they face daunting challenges.

Indermit Gill, the World Bank’s Chief Economist, warns that “the next 25 years will be a tougher slog for developing economies than the last 25.” High debt burdens, weak investment, stagnant productivity growth, and the rising costs of climate change are now emerging as key obstacles.

“The forces that once aided their rise have dissipated,” Gill said, emphasizing the need for a new economic strategy. Developing economies, he suggests, must focus on domestic reforms to attract private investment, enhance trade relations, and optimize the use of capital, talent, and energy.

The report also highlights the importance of trade partnerships, particularly among developing economies, as a potential catalyst for growth. “In a world shaped by policy uncertainty and trade tensions, developing economies will need bold policies to seize untapped opportunities for cross-border cooperation,” said M. Ayhan Kose, Deputy Chief Economist at the World Bank.

Although the global outlook is clouded by high policy uncertainty, rising trade tensions, and persistent inflation, there is also potential for stronger-than-expected growth. Stimulus measures in China could boost demand, while robust household spending in the United States could benefit global growth, including that of developing economies.

The report emphasizes that while challenges abound, there are key opportunities for developing nations to improve their growth prospects. Addressing infrastructure deficits, accelerating the transition to a low-carbon economy, and investing in human capital can drive sustainable growth. Moreover, countries should collaborate to strengthen global trade governance, supported by multilateral institutions.

Developing economies, while facing significant hurdles, have a path forward if they pursue the right policies to turn challenges into opportunities.

Tags:

Keywords:

_{Images are for reference only.Images and contents gathered automatic from google or 3rd party sources.All rights on the images and contents are with their legal original owners.}