At the beginning of the year, Indonesia’s national economy showed signs of weakening. This challenge has become even more difficult due to the ongoing global trade war, which was triggered by tariff policies enacted by U.S. President Donald Trump.

This raises the question: Could the sluggish economy push Indonesia toward a recession?

“There’s no need to worry about a recession,” said Chatib Basri, a member of the National Economic Council (DEN), during a public lecture at the Faculty of Economics and Business, University of Indonesia (FEB UI), as quoted on Thursday (May 15, 2025).

Chatib’s confidence does not stem from the strength of Indonesia’s economic fundamentals in withstanding global trade war shocks, but rather from a stroke of “luck,” due to Indonesia’s relatively limited economic integration with the rest of the world.

“Why? Two reasons: good policy response and good luck. Honestly, this wasn’t by design—it's because we’re not very competitive,” Chatib explained.

He further elaborated that Indonesia’s limited competitiveness and weak global integration have insulated it from severe impacts of international trade tensions.

This low level of integration is reflected in the relatively small contribution of exports to Indonesia’s gross domestic product (GDP), especially when compared to countries like Vietnam, Singapore, and Thailand.

According to Chatib, Singapore’s export-to-GDP ratio can reach 180%, Vietnam’s is 79%, and Thailand’s sits around 60%. In contrast, Indonesia’s ratio is only about 25%.

“That’s why you shouldn’t be surprised if Indonesia’s economic growth this year outpaces Vietnam and Singapore. It’s simply because our export share to GDP is significantly lower,” Chatib said.

The International Monetary Fund (IMF) has made a similar observation. In its latest World Economic Outlook (WEO) published in April 2025, the IMF projected Indonesia’s economic growth to decline to 4.7% in both 2025 and 2026.

This forecast is a downward revision from the earlier January 2025 WEO, where the IMF had predicted Indonesia’s economy would grow by 5.1% in both years.

However, the IMF also expects that Vietnam’s economy will slow even more than Indonesia’s as a result of the ongoing trade war. Vietnam’s growth is projected to drop to 5.2% in 2025, down from 7.1% in 2024.

The U.S. tariff measures are expected to further depress Vietnam’s economy, with growth potentially falling to just 4% by 2026—significantly lower than Indonesia’s forecast.

Nonetheless, it is important to note that when the global economy begins to recover, Indonesia might face a slower recovery compared to countries that are more globally integrated. This is because exports—one of the key components of GDP—will not benefit as much from the global rebound.