Global economic uncertainty, triggered by ongoing tariff disputes originating from former U.S. President Donald Trump’s policies, continues to raise concerns over Indonesia’s economic growth and banking sector resilience.
Governor of Bank Indonesia (BI), Perry Warjiyo, stated during a virtual press conference following the April 2025 BI Board of Governors Meeting on Wednesday (Apr. 23) that the ongoing reciprocal tariff policies between the United States and China have heightened global uncertainty. These developments have contributed to rising economic fragmentation and a decline in international trade volumes.
An economist from the UGM Faculty of Economics and Business, Dr. Muhammad Edhie Purnawan, explained that the primary impact of global uncertainty on Indonesia’s economy stems from geopolitical tensions, protectionist policies, and financial market volatility. These factors have weakened the rupiah, suppressed exports, and reduced purchasing power.
He added that the strengthening of the U.S. dollar, driven by the Federal Reserve’s policies, has increased the burden of foreign debt and import costs. Nonetheless, the current BI Rate of 5.75% has helped maintain financial system stability.
“The banking sector, with assets totaling Rp12,000 trillion, is facing significant challenges, including digital disruption, liquidity pressure, and credit risk,” said Dr. Purnawan on Tuesday (Apr. 29) at the UGM Campus.
He emphasized that banks must continue to innovate to strengthen liquidity and manage risks prudently, particularly in the face of rising competition from fintech. He noted that millennials, who make up 54 percent of the productive population, are demanding faster and more affordable financial services.
“Banks must invest heavily in technologies such as open banking and artificial intelligence while also safeguarding against cyber threats. Liquidity pressures are mounting due to capital outflows caused by high global interest rates and energy conflicts, which have weakened the rupiah and compressed profit margins,” he said.
To address these challenges, Dr. Purnawan called for stronger coordination between the government and Bank Indonesia through the implementation of synchronized monetary and fiscal policies. Key measures include ensuring food security, accelerating the digitalization of micro, small, and medium enterprises (MSMEs), and enhancing economic diplomacy to support economic sovereignty.
He also urged BI to maintain the benchmark interest rate and continue open market operations to stabilize the rupiah while monitoring credit and financing conditions.
“In the long term, economic and banking stability must support inclusive growth, from innovative farmers to scientists improving productivity. These efforts should be grounded in economic resilience, sustainable banking, and financial inclusion,” he added.
“The government and Bank Indonesia must maintain price stability, support consistent growth through prudent monetary policy, and ensure that the national budget continues to assist MSMEs and provide affordable energy.”
Another economist from the UGM Faculty of Economics and Business, Dr. Sekar Utami Setiastuti, pointed out that sectors most vulnerable to global trade disruptions include export-oriented manufacturing industries, such as textiles, footwear, and electronics, as well as primary commodities like palm oil, rubber, and fisheries.
“These sectors rely heavily on major export destinations like the United States and China, making them particularly susceptible to changes in tariff policy and weakened global demand,” she explained.
To mitigate these vulnerabilities, Dr. Setiastuti emphasized the urgency of diversifying export markets by expanding access to emerging economies in South Asia, Africa, and the Middle East. She also highlighted the importance of fiscal incentives, export financing, and improvements in national logistics infrastructure to enhance the global competitiveness of Indonesian products.
“Technical assistance and export promotion support for MSMEs are also vital to develop a broader base of resilient new exporters,” she said.
Dr. Setiastuti further stressed the need for more potent synergy between the government and Bank Indonesia to maintain macroeconomic stability and support real sector growth amid rising global uncertainty. She recommended that the central bank continue stabilizing the rupiah through a responsive interest rate policy and strategic interventions in the foreign exchange and securities markets, including the issuance of Bank Indonesia Rupiah Securities (SRBI).
From the government’s side, she called for reallocating spending toward sectors most affected by global trade conflicts—specifically export-oriented manufacturing, agriculture, and logistics infrastructure.
“Indonesia’s economic and banking outlook remains cautiously optimistic. However, stronger coordination among monetary, fiscal, macroprudential, and microprudential policies is essential to ensure economic resilience and sustainable growth amid a complex and dynamic global environment,” she concluded.
Author: Kezia Dwina Nathania
Editor: Gusti Grehenson
Post-editor: Afifudin Baliya
Photograph: Freepik