Indonesia’s economy has shown resilience in maintaining growth of around 5% in recent years, yet this pace is insufficient to escape the middle-income trap. To become a high-income nation, the country must achieve and sustain growth above 7% over multiple decades, following the path of Japan and South Korea.

The government’s vision of reaching 8% growth rests on leveraging Indonesia’s strong domestic demand base, balancing private sector dynamism with supportive public sector policies, and ensuring that growth is both equitable and stable.

Indonesia's Real GDP Growth

Drawing lessons from Milton Friedman’s monetary theory and the Great Depression, crises often begin with liquidity shortages. Indonesia’s historical data show that higher base money growth during Pak Susilo Bambang Yudhoyono's era (averaging 17.4% YoY) coincided with stronger credit expansion and faster GDP growth, compared with slower liquidity expansion under Jokowi. At present, base money (M0) growth remains subdued at just 0.34% YoY (August 2025), underscoring the need for greater monetary and fiscal injections to stimulate the real economy.

Indonesia's M0, Deposit and Lending Data

Policy direction emphasizes two complementary levers. First, fiscal liquidity: the government holds large idle balances in banks—over IDR 538tn as of mid-2025—that could be better mobilized into productive sectors. Second, monetary liquidity: Bank Indonesia’s open market operations, both conventional (IDR 811tn) and sharia (IDR 74tn), need to channel more liquidity to the real economy rather than remain concentrated in financial instruments. Strengthening these channels will not only support growth but also ensure a steady expansion of credit, thereby improving corporate funding, household consumption, and investment flows.

Central Government's Fund Allocated in BI

*compared to Budget Spending of the year

For capital markets, this roadmap signals an environment of greater liquidity availability. Stronger fiscal disbursements and looser monetary conditions should improve domestic liquidity, attract foreign capital, and support equities, bonds, and banking intermediation.

By combining growth ambitions with liquidity expansion, Indonesia is positioning itself to create a virtuous cycle of higher output, stronger investor confidence, and greater financial stability—key pillars for realizing its 8% growth target. Therefore, we recommend to stay invested in the equity market as we expect liquidity to continue to rise.