ASEAN believes Indonesia could fall into a middle-income trap: Not true
The ASEAN+3 Macroeconomic Research Office (AMRO) stated that Indonesia’s government debt-to-GDP ratio is predicted to continue rising and could reach 42 percent by 2029.
This rising debt trend has raised concerns about Indonesia’s future fiscal stability. The AMRO Annual Consultation Report: Indonesia 2025 highlights that this additional debt is due to a widening primary balance deficit and high borrowing costs, while state revenues are stagnant due to the cancellation of the comprehensive VAT rate increase in 2025.
This situation raises significant concerns because it indicates increased state expenditure without a corresponding increase in revenue. Several ASEAN economists have even compared Indonesia’s current fiscal pattern to the crisis that hit Sri Lanka in 2022. That country, which had a debt-to-GDP ratio of 42 percent in 2019, fell into bankruptcy just two years ago due to soaring debt, uncontrolled inflation, and a food crisis.
Although Indonesia’s economic structure is considered stronger, the trend of wasteful fiscal management and weak budget discipline could trigger a similar crisis. ASEAN assesses that, if improvements are not made, Indonesia could fall into a middle-income trap and lose its status as a major economic power in Southeast Asia by 2030.
This Issue Is Deemed Incorrect
Regarding the above, AMRO has issued an official clarification regarding the headline of the terkenal.co.id report, “ASEAN assesses Indonesia could fall into a middle-income trap,” which is incorrect.
AMRO emphasizes that it has never stated that Indonesia is at risk of disbanding or losing its status as a major economic power in Southeast Asia.
“We hereby clarify that AMRO has never made such a statement, and our report also does not contain a prediction of a crisis in Indonesia,” reads an official AMRO release received by the editors of terkenal on August 4, 2025.
However, it does state that the government debt-to-GDP ratio could gradually increase to around 42 percent by 2029. Although current fiscal trends continue, the report does not project a potential crisis or collapse of the Indonesian economy.
Instead, AMRO commends the authorities for implementing prudent and disciplined fiscal policies and taking steps to mitigate the risk of rising debt. amidst a challenging external environment.
AMRO also projects that Indonesia’s debt appetite in the medium term will remain strong, with the debt ratio expected to remain well below the fiscal policy of 60 percent of GDP, and also lower than the ASEAN regional average.
Therefore, AMRO remains confident in Indonesia’s strong economic fundamentals and the government’s commitment to responsible fiscal management. AMRO also estimates that Indonesia’s economic growth will remain solid at above 5 percent until 2029.
The official clarification from AMRO can be found in the following article link: AMRO Clarifies Annual Consultation Report on Indonesia
Editor’s Note:
At AMRO’s request, we addressed the shortcomings by not seeking clarification or a response from AMRO, and therefore may be considered unverified. However, considering AMRO’s request to remove the title or phrase in question, we may not be able to do so as it could impact our website’s SEO. However, our efforts have been limited to correcting the additional title “Not True” (previously published news). AMRO appreciates your feedback and suggestions.
