appConfigEntityId

bodyType

customContents

entityId

entityUuid

isVideo

articlePageQuery

article

articleSchemaContent

content

hooksArticlePageAdvertisementConfigArticle

hooksArticlePageFloatingButtonConfigArticle

appConfig

filter

json

liveArticle

Amy Sood

Indonesia must bolster support for informal and rural businesses if it is to revive its slowing economy and meet President Prabowo Subianto’s ambitious goal of raising annual growth to 8 per cent by the end of his term, according to former officials and economists.
Micro, small and medium enterprises (MSMEs) account for more than 60 per cent of Indonesia’s gross domestic product and employ nearly 117 million people – or 97 per cent of the total workforce – according to government data. Yet most operate in the informal sector and lack consistent support from national policy, observers say.
“The grass-roots economy has become important right now,” said Rudiantara, Indonesia’s former minister of communication and information, speaking at the Asia Grassroots Forum in Bali on Thursday. “There is a lot of resilience in these lower- and middle-income communities – so we need to ensure that we are supporting them.”
Rudiantara, who also serves as president commissioner at the microfinance platform Amartha, which hosted the forum, said Indonesia’s path to economic recovery would depend on empowering its rural and informal sectors – particularly with key indicators pointing to growing macroeconomic headwinds.
“Our economic performance in the first quarter has declined … we’re seeing this reflected in falling car and motorcycle sales, and in what’s known as the lipstick effect,” he said, citing the theory that consumers typically would opt for smaller, affordable luxuries during times of financial stress.

Indonesia’s economy posted its slowest growth rate in over three years in the January to March period, at 4.87 per cent year-on-year, down from 5.02 per cent in the previous quarter, according to official data released by Statistics Indonesia.
Analysts warn that budgetary pressures, sluggish consumer spending, and the ripple effects of American tariffs could further dampen the country’s economic outlook this year.
The slowdown could challenge Prabowo’s pledge to increase annual growth in Southeast Asia’s largest economy to 8 per cent by the end of his five-year term in 2029, analysts say.
Businessman Sandiaga Uno, who served as Indonesia’s Minister of Tourism and Creative Economy from 2020 to 2024, noted that support for the informal economy would be crucial if Indonesia were to achieve the targeted growth rate.
“Indonesia must take opportunities in the face of economic uncertainties, and we can leverage one sector that is very resilient, which is our grass-roots economy,” Sandiaga said at the forum.
Prabowo’s administration is contending with external pressures, including global economic headwinds from the US-China trade war and the threat of Washington’s hefty “reciprocal” tariffs, at 32 per cent for Indonesia’s exports to the US.
Tightening budgetary constraints after the government implemented spending cuts and reallocated funds to finance Prabowo’s flagship programmes are hindering domestic growth in Indonesia, according to economists.

One of the programmes is the free meal initiative for children and expectant mothers, of which has been allocated US$4.4 billion this year, as well as a controversial new sovereign wealth fund with an initial commitment of US$20 billion.
Sandiaga suggested that the government could integrate micro and small businesses into its initiatives, such as the free meal programme, by employing women from rural areas and creating pathways for lower-income communities to move towards the middle class.
“Who better to provide nutritional meals than mothers?” he said. “Involve [the women] in these programmes and empower them through these initiatives. That’s how we can drive our economy forward.”
Despite some signs of a slowdown in Indonesia’s economy, Sandiaga has expressed optimism of a rebound through policies targeting lower-income and middle-class communities.
“The question has been raised about whether government support for MSMEs is necessary if the private sector is [better established] in this area,” he said.
“However, the grass-roots economy cannot be approached with this mindset – its growth requires collective involvement and support.”


Named as an enemy: Indonesia’s uneasy Aukus moment

Malaysia deploys air force aircraft for cloud seeding to combat worsening haze

Why the Global South keeps its doors wide open to Russia

Pride or practicality? Indonesia receives first aircraft carrier amid fears of upkeep cost

Indonesia

Indonesia faces calls to boost economy through more support for small businesses

A merchant checks bags displayed at his stall at Beringharjo traditional market in Yogyakarta on May 5. Indonesia posted an economic growth rate of 4.87 per cent year-on-year in the first quarter of 2025, according to official data. Photo: Xinhua

People shop for vegetables at a traditional market in Denpasar, Bali on May 14. Indonesia’s economy posted its slowest growth rate in over three years in the January to March period. Photo: EPA-EFE

Bill Gates and Indonesian President Prabowo Subianto view meal boxes during their visit to a school to inspect the free nutritious meals programme in Jakarta on May 7. Photo: Reuters

Grab’s GoTo takeover bid: a step too far for Indonesia?

News of the possible deal sent shares of Jakarta-listed GoTo soaring. Photo: GoTo

Patrick Walujo, chief executive officer of Indonesia’s GoTo. Photo: GoTo

A man in Indonesia reads a newspaper with an advertisement showing the merger between Gojek and Tokopedia in 2021. Photo: EPA-EFE

Grab drivers ride motorbikes in Jakarta, Indonesia. Grab Indonesia has dismissed speculation about the merger. Photo: AP

Indonesia slams Singapore’s ‘shameful’ fuel prices, plans pivot to US imports

An oil refinery on Pulau Bukom off Singapore. Indonesia imports a large volume of fuel from Singapore due to its lack of refining capacity. Photo: AFP

Energy and Mineral Resources Minister Bahlil Lahadalia has slammed the “shameful” prices charged by Singapore for its oil exports to Indonesia. Photo: AFP 

Chief Economic Minister Airlangga Hartarto is leading Indonesia’s trade talks with the US. Photo: AFP

A Pertamina station in Surabaya. The Indonesian state energy firm has pledged to boost its capacity to store more oil imports from the US. Photo: AFP

In Indonesia, nickel miners warn of mass lay-offs as royalty rise threatens profits

A worker processes nickel at a smelter on Indonesia’s Sulawesi island. Photo: Reuters

An aerial view of nickel mining in Indonesia’s Raja Ampat Islands. Photo: Auriga Nusantara

Indonesian President Prabowo Subianto has pledged to raise growth to 8 per cent by 2029. Photo: AP

Indonesia’s economy slows as US tariffs, fiscal pressures challenge Prabowo’s growth goal

Indonesian President Prabowo Subianto speaks during a press conference in Kuala Lumpur in January. Photo: AP

Bill Gates (right), co-founder of Microsoft and Indonesian President Prabowo Subianto inspect the Free Meals Programme, a scheme providing free meals to schoolchildren and pregnant women, at a junior school in Jakarta on Wednesday. Photo: AFP

Indonesia’s EV revolution held hostage by ‘preman’ gangster problem

BYD EVs are displayed at the Periklindo Electric Vehicle Show 2025 in Jakarta on Tuesday. Photo: Xinhua

Eddy Soeparno (left), deputy speaker of the People’s Consultative Assembly of Indonesia, shakes hands with Wang Huning, chairman of the National Committee of the Chinese People’s Political Consultative Conference, in Beijing on April 15. Photo: Xinhua

A visitor takes a selfie inside a Vinfast car at the Indonesia International Auto Show in Tangerang last year. Photo: Reuters

Indonesian rupiah banknotes at a money changer in Jakarta. Photo: AFP

This Week in Asia

Economics

News

Asia

Southeast Asia

Micro, small and medium enterprises account for over 60 per cent of Indonesia’s economy, and analysts say support for them is critical


Micro, small and medium enterprises account for over 60 per cent of Indonesia’s economy, and analysts say support for them is critical.


Consumers

Retailing

Jobs

Prabowo Subianto

Indonesia faces calls to boost economy through more support for small businesses

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Micro, small and medium enterprises account for over 60 per cent of Indonesia’s economy, and analysts say support for them is critical

Micro, small and medium enterprises account for over 60 per cent of Indonesia’s economy, and analysts say support for them is critical