Indonesia’s government debt-to-GDP ratio was 39.7% as of January 2025, with an IMF projection of 40.1% by the end of the year. Compared to other ASEAN countries:
- Malaysia: 64.6% in 2024, projected to reach 65% in 2025.
- Vietnam: 37.5% in 2024, projected 36.9% in 2025.
- Cambodia: 27% in 2024, projected 27.8% in 2025.
- Timor-Leste: 14.3% in 2024, projected 15.1% in 2025.
- Brunei: 2.29% in 2024, projected 2.2% in 2025.
- Laos: 112.2% in 2024.
- Singapore: 174.3% in 2024, the highest in ASEAN.
Indonesia’s debt ratio remains relatively low compared to some neighboring countries, but economists warn that low tax revenue growth could pose challenges in managing debt sustainability.
The reason behind Indonesia’s low debt-to-GDP ratio.
Indonesia maintains a relatively low debt-to-GDP ratio due to several key factors:
- Prudent Fiscal Management – The government has consistently kept borrowing in check by ensuring that expenditures do not significantly exceed revenues. This approach prevents excessive reliance on debt financing.
- Strong Revenue Streams – Indonesia generates substantial revenue from taxation, state-owned enterprises, and natural resource extraction (such as oil, gas, and minerals). These income sources help fund government operations without excessive borrowing.
- Controlled Budget Deficit – While Indonesia does run a budget deficit, it remains relatively small (around 1.65% of GDP in 2023), limiting the need for large-scale debt accumulation.
- Debt Utilization Strategy – The government prioritizes productive spending on infrastructure, education, and health, ensuring that borrowed funds contribute to long-term economic growth.
- Stable Economic Growth – A growing economy allows Indonesia to manage its debt more effectively, reducing the need for aggressive borrowing.
Indonesia’s approach to debt management has helped maintain investor confidence and economic stability, making it one of the more financially disciplined economies in ASEAN.
Impact of Indonesia’s low debt-to-GDP ratio.
Indonesia’s relatively low debt-to-GDP ratio has several key impacts:
- Economic Stability – A lower debt ratio means Indonesia is less vulnerable to external shocks, such as global financial crises or currency fluctuations. This has helped maintain low inflation rates and steady economic growth.
- Investor Confidence—Foreign investors tend to favor economies with manageable debt levels, which signals fiscal discipline and a lower risk of default. This can lead to higher foreign direct investment (FDI) and stronger capital inflows.
- Government Flexibility – With a lower debt burden, Indonesia has more room to allocate funds for infrastructure, social programs, and economic development without excessive reliance on borrowing.
- Challenges in Growth – While a low debt ratio is generally positive, some economists argue that Indonesia’s cautious borrowing approach may limit its ability to finance large-scale projects that could accelerate economic expansion.
Overall, Indonesia’s fiscal management has positioned it as one of the more resilient economies in ASEAN.
