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View all search resultsGovt not worried about inflation as growth remains below potential
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Light from an LCD projector shines on Finance Ministry Purbaya Yudhi Sadewa's face before he sits down to brief the press about the ministry's efforts to fix the faulty Coretax system at the Finance Ministry's press room in Jakarta on Oct, 24, 2025. (JP/Deni Ghifari)
T
he government says last month’s liquidity injection into the financial market should not raise inflation concerns because the country’ economy is still below its potential output capacity.
“Demand-pull inflation”, or price increases prompted by aggregate demand exceeding aggregate supply, was no cause for concern, since annual gross domestic product (GDP) growth was still only around 5 percent, Finance Minister Purbaya Yudhi Sadewa said on Tuesday.
“What’s the calculation for our potential growth? For now it’s maybe 6.7 percent, that’s the pace where we have to grow. It has to grow at a minimum of 6.7 percent to absorb the workforce in the formal sector,” Purbaya said in an event organized by the Institute for Development of Economics and Finance (INDEF) and CNBC Indonesia.
He expressed confidence that Indonesia’s growth could easily touch 6 percent once private sector activity revs up but jokingly added that reaching President Prabowo Subianto’s goal of 8 percent “requires prayers”.
The country’s GDP growth has been hovering around 5 percent for about a decade, and the formal-sector unemployment rate has been dropping, but Purbaya suggested all is not well, since most of the workforce is employed in the informal sector: “Their future is not guaranteed”.
“When economic growth is above [the potential rate] for a few years, then it will push up what’s called demand-pull inflation. For now, it’s still too soon, [...] so you don’t have to worry that we’ll be growing too fast now. In fact, we have to grow faster,” insisted Purbaya.
Read also: Govt gunning for high GDP growth from this quarter onward
