December 25, 2025 | 05:14 pm
TEMPO.CO, Jakarta - The Center of Reform on Economics (CORE) predicts that economic growth targets for this year and 2026 will be difficult to achieve due to floods in Sumatra. “CORE estimates that the Sumatra disaster has the potential to correct Indonesia's economic growth in 2025 by 0.02 percent,” quoted from the COREinsight report Konsekuensi Ekonomi di Balik Duka Sumatera (Economic Consequences Behind the Sumatra Grief), cited on Thursday, December 25, 2025.
CORE states that the pressure on national growth is mainly caused by the paralyzed economic activities in Aceh, North Sumatra, and West Sumatra, which contribute around 9 percent to the national Gross Domestic Product (GDP). Meanwhile, 52 regencies/cities from the affected provinces contribute about 5.9 percent of the national GDP.
Economic growth in the three affected provinces is expected to decline. CORE predicts that Aceh will face the most pressure, with an estimated 0.44 percent negative correction to the regional gross domestic product (GDP) growth in 2025. Meanwhile, North Sumatra's growth decreased by 0.15 percent, while West Sumatra's decreased by 0.36 percent.
Furthermore, CORE predicts that the growth of investment in the three provinces will also decline. Investment in Aceh may decrease by 2.19 percent, while in North Sumatra it is down by 0.86 percent. West Sumatra's potential investment has plummeted by 1.45 percent. Meanwhile, at the national level, CORE predicts that investment growth is expected to be cut by 0.1 percent this year.
CORE's analysis estimates that all leading sectors in the three affected provinces will be corrected. The value of the plantation and palm oil industries in Aceh is predicted to decrease by 0.08 percent. In West Sumatra, the decrease is predicted to be 0.09 percent, while in North Sumatra, it is predicted to be 0.01 percent.
The construction industry is expected to face the most pressure, with a potential correction of 2 percent in Aceh. Meanwhile, the industry is expected to decrease by 0.8 percent in North Sumatra and by 1.3 percent in West Sumatra.
Taking into account the tsunami disaster in Aceh in 2004, CORE predicts that the economic impact of the Sumatra floods could last more than a year. At that time, the economic shock caused by the disaster did not end with the emergency phase, but continued into the recovery phase.
Following a 10 percent contraction in the year of the incident, CORE noted that Aceh's economic growth fluctuated and remained under pressure for several years. Aceh's economic growth eventually stabilized and began to grow consistently by 2010.
CORE assesses the real risk of a scarring effect on the regional economy after the Sumatra flood. Correcting growth in leading sectors such as plantations, the manufacturing industry, and construction puts pressure on output in the short term. It also potentially reduces household income, weakens the regional tax base, and lowers the attractiveness of investment.
According to CORE, this layered pressure risks prolonging the recovery process, especially if infrastructure rehabilitation and basic service recovery progress slowly due to financing limitations.
Disruption of infrastructure due to the disaster has caused supply chain disruptions, limited access to basic services, destroyed households' productive assets, and increased the fiscal burden on regional and central governments. As a result, low and lower-middle-income groups, despite bearing a double burden due to vulnerability to physical damage and weak recovery capacities, are affected.
Read: A Disastrous Complication of Environmental Damage
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