Digital Transformation Key to Future Growth
JAKARTA, December 17, 2025 - Indonesia's economy grew 5.0% in the first nine months of 2025, and growth is projected to remain around this level through 2026 and 2027, supported by strong investment and net exports.
According to the World Bank's Indonesia Economic Prospects (IEP) December 2025 report, titled "Digital Foundations for Growth" released today, the country's monetary and fiscal policies have become more accommodative, with stimulus measures boosting private credit and consumption while maintaining fiscal discipline and moderate inflation. However, despite macroeconomic stability, labor market challenges persist, impacting household welfare. The economy is creating jobs for most labor entrants, but it is doing so mostly in low-value added sectors with many failing to pay middle-class wages. Between 2018 and 2024, real wages declined by 1.1 percent annually.
"Structural reforms can unlock productivity and driving the creation of better-paying jobs," said Carolyn Turk, World Bank Division Director for Indonesia and Timor-Leste. "Improving skills, fostering competition, and strengthening the business environment through digitalization will open more opportunities for Indonesia to move towards high-value employment and ensure growth translates into better living standards for all."
The report zooms in on how expanding and upgrading Indonesia's digital infrastructure can help strengthen the country's productivity and competitiveness. Indonesia's digital economy-measured in gross merchandise value terms-remains the largest in ASEAN in 2025, but challenges to realizing its full potential remain. Access to Internet has expanded rapidly, but the quality and usage remain uneven: average internet speeds are falling behind regional peers, and many users in rural areas, schools and health clinics lack high-speed connections. Local data center capacity is expanding but requires a more supportive investment and regulatory environment to reach its full potential. Actionable measures are within reach-including scaling up existing government programs-to address these challenges and accelerate progress toward a more inclusive and competitive digital economy.
"Indonesia's digital ambitions match the tremendous opportunities ahead," said Mahesh Uttamchandani, World Bank Regional Practice Director for Digital and AI in East Asia and Pacific and South Asia. "The government's commitment to the digital transformation of public services and the economy is generating strong momentum, with scope to go even further as digital tools and AI open new opportunities for achieving Indonesia's development goals."
"Digital transformation offers Indonesia a powerful engine for future growth," said David Knight, World Bank Lead Country Economist for Indonesia and Timor-Leste. "Enhancing the reach and quality of digital infrastructure, supported by a predictable regulatory environment, will be key to unlocking the benefits of the digital economy."
To achieve Indonesia's digital ambitions, the report makes the following recommendations:
- Network Access & Competition:
- Accelerate the allocation of more spectrum for mobile broadband and 5G.
- Promote fair open access to fiber networks and passive infrastructure, including PLN's electricity poles, to improve competition and reduce deployment costs
- Inclusive Connectivity & Affordability:
- Mobilize private investment to expand fixed broadband in rural areas by aggregating internet subscriptions of schools, health clinics, and other government facilities.
- Review Palapa Ring, part of Indonesia's national broadband backbone network, wholesale tariffs to ensure affordable access in underserved regions.
- Data Infrastructure & Governance:
- Create a more conducive investment environment for data centers through more coordinated incentives, streamlined regulations and issuance of the government regulation on personal data protection.
Strengthening digital infrastructure-especially by mobilizing private investment and together with advancing digital skills and safeguarding digital trust-is key to expanding access to opportunity, creating quality jobs, and driving inclusive growth for the benefits of all Indonesians.
