2025 Macro Outlook: Embarking On a New Chapter

Stock Code	Last Price	Change	Change %
DSSA	44,950	2,700	6.39%
DCII	169,200	2,250	1.35%
MFIN	5,400	800	17.39%
RDTX	12,450	700	5.96%
PTRO	2,910	460	18.78%
MKPI	25,200	450	1.82%
CUAN	7,325	350	5.02%
RATU	5,700	300	5.56%

2025 Macro Outlook

Embarking On a New Chapter

2024: A Year Defined by Volatility. In 2024, Indonesia’s capital flows were highly volatile, driven by global monetary policy shifts, geopolitical tensions, and domestic challenges. Inflows turned negative in 1Q24, mainly due to declining bond foreign inflows as rising global rate uncertainty and geopolitical risks dampened investor appetite. A strong rebound in 2Q24, peaking in May, was led by SRBI inflows supported by attractive yields and improved sentiment, with moderate bond inflows and marginal equity market contributions. From June to August, inflows moderated but stayed positive, with bond market providing stability amid clearer global monetary signals. However, 4Q24 saw inflows drop sharply, turning negative in October and November amid escalating geopolitical tensions, US election and higher uncertainty on US rate cuts outlook. Weak domestic growth and a stronger US dollar also eroded investor confidence. These trends highlight Indonesia's sensitivity to external risks and a lack of strong domestic drivers.

2025: Navigating Risks in an Easing Cycle As 2025 unfolds amidst shifting global dynamics, two major narratives are poised to dominate: Donald Trump’s return to the US presidency (Trump 2.0) and China’s persistent economic struggles. These developments are expected to have far-reaching effects, influencing global markets and creating ripple effects for emerging economies. For Indonesia, navigating these global headwinds will require robust and proactive fiscal policies. The government's ability to maintain economic momentum through targeted fiscal spending will be crucial in fostering investor confidence and attracting capital inflows. With global monetary policy likely to ease further, Indonesia's response in managing domestic growth drivers and leveraging external conditions will determine its resilience in 2025. These factors will play a pivotal role in shaping the nation’s economic trajectory and its integration into a changing global landscape.

Fortifying Domestic Resilience as a Foundation for Future Growth. In an era of heightened global volatility and uncertainty, strengthening domestic resilience is crucial for long-term stability and progress. Acknowledging this, the new government has placed energy and food security at the forefront of its policy agenda. These initiatives aim to safeguard the economy against external shocks while establishing a solid foundation for sustainable growth. Fiscal policy is expected to play a pivotal role in driving Indonesia’s economic performance in 2025, marking the beginning of the country’s journey toward its ambitious target of 8% economic growth by 2029. Achieving this goal will require targeted investments and carefully crafted initiatives to enhance key sectors such as infrastructure, agriculture, and renewable energy. These efforts not only aim to fortify economic stability but also position Indonesia as a more self-reliant and competitive player in the global economy, laying the groundwork for a resilient and prosperous outlook.

Gradual Easing Cycle Fosters Lower Yields. In 2025, yield trends will be shaped by global and domestic factors. Trump’s policy directions could push US Treasury yields higher, while China’s stimulus efforts may draw capital away from INDOGB. Despite these headwinds, anticipated rate cuts by the Federal Reserve and Bank Indonesia, along with a pro-market stance by the Indonesian government, are expected to bolster the capital market and enhance INDOGB's appeal. We project INDOGB yields to range between 6.1% and 6.6%, with a baseline of 6.23%, below the government’s 7.0% assumption. This outlook reflects stability driven by supportive monetary policies and resilient domestic market conditions, even amid global uncertainties.